AIR - Air NZ.

[whatsup]

Lets face facts, AIR N Z is broke, what is needed now is a massive recap, so where is that money to come from,

1/ Off shore - nope.
2/ Current Share holders except the N Z govt - very little say 30% will pony up.
3? N Z govt- yes as they have done once before.

So imho its rinse and repeat again.

[Balance]

Lets face facts, AIR N Z is broke, hat is needed now is a massive recap, so where is that money to come from,

1/ Of shore - nope.
2/ Current Share holders except the N Z govt - very little say 30% will pone up.
3? N Z gove- yes as they have done once before.

So imho its rinse and repeat again.

Remember - I walk away.

Will sober up Jacinda and Grant no end.

[Beagle]

Lets face facts, AIR N Z is broke, hat is needed now is a massive recap, so where is that money to come from,

1/ Of shore - nope.
2/ Current Share holders except the N Z govt - very little say 30% will pone up.
3? N Z gove- yes as they have done once before.

So imho its rinse and repeat again.

Well yes, no and maybe ? Here's an interesting philosophical / moral question. Why bail them out and pay lucrative redundancy packages wherein some long serving pilots and management on $400K plus might be eligible for many hundreds of thousands, or perhaps in some cases $1m+ each in redundancy payments ? Why should hard working ordinary Kiwi's on modest money who pay their taxes give those guys a massive golden handshake and comfortable retirement ? Shouldn't these fat cats have their own retirement plans sorted out already ?

It might cost billions to keep them going for just one year with their bloated cost structure. Who's to say this virus is completely behind us one year from now ?
Why not just let the airline fail and start fresh which a massive clean out of the bloated cost structure and buy the assets off the receivers ? Receivers would continue to trade the company and the only buyer is the Govt who effectively nationalise the airline. That's the only way to properly clean out all the dead and old wood with its massive sense of entitlement mentality that's deeply ingrained in the culture of this company.

Under a new structure people could be paid based on a far more realistic basis that they have the security of a Government job for life. If they don't like that tell them good luck finding work with another airline and see you later. Sorry, but I don't think its right that the fat cats are kept in total luxury and comfort at the taxpayers expense.

P.S. In latest developments - N.Z. closes its borders completely effective from midnight tonight. I expect AIR will ground its entire international fleet by the end of the month or very very shortly thereafter. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12318284
AIR will be left with its domestic services only running at perhaps at 30-40% of normal capacity as the fear of lying means most will travel by car.

[Raz]

Well yes, no and maybe ? Here's an interesting philosophical / moral question. Why bail them out and pay lucrative redundancy packages wherein some long serving pilots and management on $400K plus might be eligible for many hundreds of thousands, or perhaps in some cases $1m+ each in redundancy payments ? Why should hard working ordinary Kiwi's on modest money who pay their taxes give those guys a massive golden handshake and comfortable retirement ? Shouldn't these fat cats have their own retirement plans sorted out already ?

It might cost billions to keep them going for just one year with their bloated cost structure. Who's to say this virus is completely behind us one year from now ?
Why not just let the airline fail and start fresh which a massive clean out of the bloated cost structure and buy the assets off the receivers ? Receivers would continue to trade the company and the only buyer is the Govt who effectively nationalise the airline. That's the only way to properly clean out all the dead and old wood with its massive sense of entitlement mentality that's deeply ingrained in the culture of this company.

Under a new structure people could be paid based on a far more realistic basis that they have the security of a Government job for life. If they don't like that tell them good luck finding work with another airline and see you later. Sorry, but I don't think its right that the fat cats are kept in total luxury and comfort at the taxpayers expense.

P.S. In latest developments - N.Z. closes its borders completely effective from midnight tonight. I expect AIR will ground its entire international fleet by the end of the month or very very shortly thereafter. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12318284
AIR will be left with its domestic services only running at perhaps at 30-40% of normal capacity as the fear of lying means most will travel by car.

Back here and in isolation, even Auckland airport was deserted...nice idea, I would look at it closely...the accumulated effect on the national accounts of all this means somethings that can be done need a reset. Future generations are owed it that we do this fiscally sensible where able. That even means forgoing my air point dollars!

[Beagle]

Welcome back Raz. I hope you have more time to post on here.

[Baa_Baa]

Jetstar cut 90% domestic, 65% jobs as well. Plane from AK half full, airport empty.

[bottomfeeder]

Loan, oh my god, the childlishness. As a Director I would be very concerned about trading while insolvent. A loan will not rescue the company. I have a sneaking feeling the Labour Government will let the company fail and Nationalise the airline. After all the Govt, will not let it fail, and will not prop up the other shareholders in any way from taxes. The propping up could continue for years. Sorry but I think shareholders have lost their capital on this one.

[silverblizzard888]

Loan, oh my god, the childlishness. As a Director I would be very concerned about trading while insolvent. A loan will not rescue the company. I have a sneaking feeling the Labour Government will let the company fail and Nationalise the airline. After all the Govt, will not let it fail, and will not prop up the other shareholders in any way from taxes. The propping up could continue for years. Sorry but I think shareholders have lost their capital on this one.

The balance sheet of Air NZ isn't that bad, they could likely find the money else where too or raise from shareholders before needing to go down or being nationalized. That views to pessimistic. Not a holder and won't be a buy when it opens tomorrow, but this company still has a profitable domestic market it can run its smaller planes in (unlike Jetstar who only operates large planes) and cash in the bank to keep things on life support.

[Beagle]

You cannot make money when you retain 70% of your staff but have only 10% of your business left. My money is on Rob Fyfe who as the former CEO of 7 years would know best and he is on record today estimating they are burning $211m a month from April onward. One virologist expert reported today he thought the virus could be with us for 18 months. That's 18 months x $211m = $3,800 million. Why should ordinary hard working Kiwi's pay to indulge the lifestyles of all those fat cats indefinitely ?

AIR will be broke by May 2020 or quite possibly a lot earlier without Govt support, in my opinion.

[trackers]

Well yes, no and maybe ? Here's an interesting philosophical / moral question. Why bail them out and pay lucrative redundancy packages wherein some long serving pilots and management on $400K plus might be eligible for many hundreds of thousands, or perhaps in some cases $1m+ each in redundancy payments ? Why should hard working ordinary Kiwi's on modest money who pay their taxes give those guys a massive golden handshake and comfortable retirement ? Shouldn't these fat cats have their own retirement plans sorted out already ?

It might cost billions to keep them going for just one year with their bloated cost structure. Who's to say this virus is completely behind us one year from now ?
Why not just let the airline fail and start fresh which a massive clean out of the bloated cost structure and buy the assets off the receivers ? Receivers would continue to trade the company and the only buyer is the Govt who effectively nationalise the airline. That's the only way to properly clean out all the dead and old wood with its massive sense of entitlement mentality that's deeply ingrained in the culture of this company.

Under a new structure people could be paid based on a far more realistic basis that they have the security of a Government job for life. If they don't like that tell them good luck finding work with another airline and see you later. Sorry, but I don't think its right that the fat cats are kept in total luxury and comfort at the taxpayers expense.

P.S. In latest developments - N.Z. closes its borders completely effective from midnight tonight. I expect AIR will ground its entire international fleet by the end of the month or very very shortly thereafter. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12318284
AIR will be left with its domestic services only running at perhaps at 30-40% of normal capacity as the fear of lying means most will travel by car.


I think its crazy to reasonably expect that the govt won't help given they're the national airline, high degree of public ownership and facing troubles due to government mandates. Guess we will see

[silverblizzard888]

You cannot make money when you retain 70% of your staff but have only 10% of your business left. My money is on Rob Fyfe who as the former CEO of 7 years would know best and he is on record today estimating they are burning $211m a month from April onward. One virologist expert reported today he thought the virus could be with us for 18 months. That's 18 months x $211m = $3,800 million. Why should ordinary hard working Kiwi's pay to indulge the lifestyles of all those fat cats indefinitely ?

AIR will be broke by May 2020 or quite possibly a lot earlier without Govt support, in my opinion.

Rob Fyfe will be right on the cash burn and its fair they will have a large wage bill, but no where will it be 18 months of that exact same thing, things will improve at least by 6 months and flying will resume on a profitable basis. You just have to look at China and how they have managed to get their impossible situation under control in 3 months. I estimate $1.5 billion loan is enough to get them through this given their current balance sheet.

[Beagle]

Respect your opinion but we don't live under military control like the Chinese so the outcome here could be very different.

[Biscuit]

Respect your opinion but we don't live under military control like the Chinese so the outcome here could be very different.

Chinese people quite like kiwis in many ways. It was as much the public-spirited determination to overcome their situation that won out as much as anything else.

[silverblizzard888]

Respect your opinion but we don't live under military control like the Chinese so the outcome here could be very different.

Currently at 28 cases could be 100 soon with the extra testing, but thats very much a situation NZ can control if they are onto it. Most of those infected have come from residents overseas coming back here. This will either head two directions, either it gets under control by April or rapidly increases once winter starts and no one can be sure who has what (which a lock-down will be required). Borders need to be closed outright, but I guess its still a right of residents to come back but soon there won't even be planes to come back here, so we could see a rush of residents coming back this month and that might spike numbers of cases (as it has currently), then the rate of growth will like fall and then grow at a slower pace.

[THEONE]

It is very strange they haven't made further cuts. The only reason I can think of is they have a reasonable deal in negotiation with Government.
The Government must be limiting their cuts. Ordering them to keep flying these flights to get people home and keep economy ticking over. Why else wouldn't they cut further? If they put AirNZ in recievership I presume this would ground all their flights.. For quite a while. Airnz is one of key drivers of economic activity. It wouldnt be worth the risk putting into recievership. Receiver surely can sell the planes to the highest bidder. Also I wonder if they would loose or need to reapply for the landing slots etc. I have no idea to be honest.. I do think AirNZ has a decent amount of bargaining power. The government dosent want them in recievership either. They want planes in the air..Especially when everything starts recovering...they should fly even when not economic to do so. Is worth it for the NZ economy

[Beagle]

Aviation is a sector where changes occur at 500 knots. Quite clear 30% human resource cuts is woefully inadequate. All international flights will be grounded shortly apart from freighter flights. Receivers can and often do continue to trade the business's under their control. My money is on the trading halt to be extended yet again tomorrow morning while they continue to crunch the numbers. If trading is allowed to resume tomorrow without a defined rescue plan you can expect several days catch-up of losses in this sector. A useful guide might be how much THL has fallen this week so far.

I would be very surprised if AIR didn't fall to under $1.00 if trading resumes tomorrow.

[Raz]

Chinese people quite like kiwis in many ways. It was as much the public-spirited determination to overcome their situation that won out as much as anything else.

From what we know so far it defies logic, China, like most countries, will not have another outbreak in time.

[bottomfeeder]

Chinas problem is now from returning citizens being infected overseas. They are a larger NZ over again. Air NZ have got planes that are worth so far below book value that storing them will cost more than they are worth. Hate to say it but this recovery needs a lot more than good ideas, good management, and good marketing. The external factors are just too great to overcome.

[biker]

AirNZ enters loan facility & cancels 2020 interim dividend
20/3/2020, 8:46 am MKTUPDTE
Air New Zealand has entered into a debt funding agreement with the New Zealand Government. Under the terms of the agreement the Government will provide a standby loan facility (‘the facility”) of up $900 million to support the airline as it manages the unprecedented impact of the Covid-19 outbreak on its business.

The facility will provide Air New Zealand with the ability to draw down on funds should its cash reserves drop below a minimum threshold, providing additional funds if cash reserves are not at a satisfactory level. The facility was negotiated on an arms’ length basis, with each party having been independently advised. The facility will be provided in two tranches – a tranche of $600,000,000 with an effective interest rate initially expected to be between 7% and 8% per annum and a second tranche of $300,000,000 with an effective interest rate initially expected to be in the order of 9% per annum. The facility will be available for a period of 24 months. The effective interest rates on both tranches will step-up by 1% if the facility remains after 12 months. This debt funding will be used to support the airline’s business operations as it manages the implications of various government border restrictions and substantial reductions in travel demand.

The availability of each tranche of the facility is subject to certain conditions precedent, including agreeing an operating finance plan with the Government and other documentary conditions precedent. Another condition precedent which Air New Zealand must satisfy in order to have the facility available is the cancellation of the 2020 interim dividend of 11 cents per share (which equates to a total of $123 million) that was announced to the market on 27 February 2020 and was due to be paid to all shareholders, including the Government, on 25 March 2020. Air New Zealand’s Board of Directors believes that, given the highly uncertain environment that exists, the cancellation of this dividend is in the best interests of the airline, including because that action is a pre-requisite to the availability of the facility. Accordingly, the Air New Zealand Board has cancelled this interim dividend effective today.

Other terms of the agreement (which is in the form of a binding terms sheet to be converted into long form agreements), include: a prohibition on payment by Air New Zealand of any dividends or other distributions to shareholders (including the Government) while any amount is available to be drawn under the facility, the giving of security for the loan by Air New Zealand and certain of its subsidiaries over their assets (subject to certain exceptions), the Government having the ability to seek repayment through a capital raise by the airline after six months, or converting the loan to equity (subject to compliance with laws and any necessary regulatory and/or shareholder approvals), Air New Zealand giving various undertakings, representations and operational and informational and other undertakings, and typical events of default. NZX Regulation has granted Air New Zealand waivers from the requirements under the NZX Listing Rules to obtain shareholder approval for entry into and performance of the facility with the Government (as a related party of Air New Zealand). Those waivers were granted because of the recent, extraordinary decline in Air New Zealand’s market capitalisation, and on the grounds that Air New Zealand’s Board of Directors have confirmed that: entry into the facility is in the best interests of all Air New Zealand shareholders (other than the Government); there has been an arms’ length negotiation in relation to the facility, and that the Government has not influenced Air New Zealand’s decision to enter into the facility.

Both Air New Zealand and the Government acknowledge that the terms of the facility do not alter the fundamental principles of their relationship, with the airlines Board of Directors, Greg Foran as CEO and the Executive Team maintaining responsibility for all commercial and operational decisions of the airline.

Separately, and distinct from this agreement, the Government is working with Air New Zealand to ensure other key services can be provided, including repatriation flights, maintaining critical cargo transport lines and having Air New Zealand staff assist the health response. Those services will be provided for under separate commercial arrangements to be negotiated in the future on an arms’ length basis between the airline and the Government.

[winner69]

So $900m from Government at exorbitant interest rates

In spite of the words about it being paid back inevitable that it will be converted into equity .....that would a huge dilution of existing shareholders

No divies for a few / many years I would say

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AIR/350298/319205.pdf

[bottomfeeder]

Bandaids don't heal cancer.

[winner69]

Bandaids don't heal cancer. I wonder what the full terms of the loan will be.

It’ll be such that the government will end up with at least 80% ownership (when loans converted to equity) ...if not 100% if they go broke.

Conversely the 48% held publicly will be 20% to zilch.

[kiwijay]

AirNZ enters loan facility & cancels 2020 interim dividend
20/3/2020, 8:46 am MKTUPDTE
Air New Zealand has entered into a debt funding agreement with the New Zealand Government. Under the terms of the agreement the Government will provide a standby loan facility (‘the facility”) of up $900 million to support the airline as it manages the unprecedented impact of the Covid-19 outbreak on its business.

The facility will provide Air New Zealand with the ability to draw down on funds should its cash reserves drop below a minimum threshold, providing additional funds if cash reserves are not at a satisfactory level. The facility was negotiated on an arms’ length basis, with each party having been independently advised. The facility will be provided in two tranches – a tranche of $600,000,000 with an effective interest rate initially expected to be between 7% and 8% per annum and a second tranche of $300,000,000 with an effective interest rate initially expected to be in the order of 9% per annum. The facility will be available for a period of 24 months. The effective interest rates on both tranches will step-up by 1% if the facility remains after 12 months. This debt funding will be used to support the airline’s business operations as it manages the implications of various government border restrictions and substantial reductions in travel demand.

The availability of each tranche of the facility is subject to certain conditions precedent, including agreeing an operating finance plan with the Government and other documentary conditions precedent. Another condition precedent which Air New Zealand must satisfy in order to have the facility available is the cancellation of the 2020 interim dividend of 11 cents per share (which equates to a total of $123 million) that was announced to the market on 27 February 2020 and was due to be paid to all shareholders, including the Government, on 25 March 2020. Air New Zealand’s Board of Directors believes that, given the highly uncertain environment that exists, the cancellation of this dividend is in the best interests of the airline, including because that action is a pre-requisite to the availability of the facility. Accordingly, the Air New Zealand Board has cancelled this interim dividend effective today.

Other terms of the agreement (which is in the form of a binding terms sheet to be converted into long form agreements), include: a prohibition on payment by Air New Zealand of any dividends or other distributions to shareholders (including the Government) while any amount is available to be drawn under the facility, the giving of security for the loan by Air New Zealand and certain of its subsidiaries over their assets (subject to certain exceptions), the Government having the ability to seek repayment through a capital raise by the airline after six months, or converting the loan to equity (subject to compliance with laws and any necessary regulatory and/or shareholder approvals), Air New Zealand giving various undertakings, representations and operational and informational and other undertakings, and typical events of default. NZX Regulation has granted Air New Zealand waivers from the requirements under the NZX Listing Rules to obtain shareholder approval for entry into and performance of the facility with the Government (as a related party of Air New Zealand). Those waivers were granted because of the recent, extraordinary decline in Air New Zealand’s market capitalisation, and on the grounds that Air New Zealand’s Board of Directors have confirmed that: entry into the facility is in the best interests of all Air New Zealand shareholders (other than the Government); there has been an arms’ length negotiation in relation to the facility, and that the Government has not influenced Air New Zealand’s decision to enter into the facility.

Both Air New Zealand and the Government acknowledge that the terms of the facility do not alter the fundamental principles of their relationship, with the airlines Board of Directors, Greg Foran as CEO and the Executive Team maintaining responsibility for all commercial and operational decisions of the airline.

Separately, and distinct from this agreement, the Government is working with Air New Zealand to ensure other key services can be provided, including repatriation flights, maintaining critical cargo transport lines and having Air New Zealand staff assist the health response. Those services will be provided for under separate commercial arrangements to be negotiated in the future on an arms’ length basis between the airline and the Government.

Oof, cancelled dividend. Will hit those dividend hunters hard, and means anyone that purchased Ex-Div got the good side of the coin!

[Balance]

Oof, cancelled dividend. Will hit those dividend hunters hard, and means anyone that purchased Ex-Div got the good side of the coin!

If I bought Air NZ cum-dividend, I will be requiring Air NZ to compensate me. This is a total & unacceptable betrayal of why there is the cum & ex dividend structure when dealing in shares.

[macduffy]

Oof, cancelled dividend. Will hit those dividend hunters hard, and means anyone that purchased Ex-Div got the good side of the coin!

Is there a good side? Buying ex div more a case of the lesser of two bad deals, I would have thought.

[Toddy]

Anyone brave enough to guess todays opening price. 10 cents is my guess.

[bottomfeeder]

If I bought Air NZ cum-dividend, I will be requiring Air NZ to compensate me. This is a total & unacceptable betrayal of why there is the cum & ex dividend structure when dealing in shares.
That's going to be interesting. Once a dividend is declared, it becomes a debt owing by the company. I don't believe they have any alternative but to credit to shareholders somehow. Not thought out well by the "advisors" to Govt and company.

[jonu]

I'm not a holder of AIR.

It seems a pragmatic deal to me.
AIR just need to get through the next 6 odd months. The world will be its oyster after that with a massive drop in competition. No discount airlines left, just a few national carriers.

[trackers]

Pretty cut-throat of govt, that interest rate is very high! And yesterday they forked out $100mil to Airways. Be interesting to see how the market reacts

[Balance]

I'm not a holder of AIR.

It seems a pragmatic deal to me.
AIR just need to get through the next 6 odd months. The world will be its oyster after that with a massive drop in competition. No discount airlines left, just a few national carriers.

Exactly what the doctor ordered.

Not a good day for the doomsday merchants who are only interested in wanting a well managed airline going through short term problems (not of its making) put into receivership.

[silverblizzard888]

Not ideal for the shareholders that were holding out for dividends, but it makes sense that legally speaking they cancel the dividend as it could have wider impact on the company's potential to continue operating. Either way they were going to have an angry crowd after them, but this at least made more financial sense.

900 million loan isn't too bad either, interest rates a bit higher than anyone would want, but given the risk it seems warranted. It will be for the temporary and in the future they could refinance with a bank at a lower rate.

[whatsup]

Exactly what the doctor ordered.

Not a good day for the doomsday merchants who are only interested in wanting a well managed airline going through short term problems (not of its making) put into receivership.


I do not think that this is the case, Im betting that the majority of Kiwis would want AIR to survive and hold its head up again in the very competitive world of air lines no matter what mistakes have been made over the years, hind sight is a wonderful conversation subject !

[Balance]

I do not think that this is the case, Im betting that the majority of Kiwis would want AIR to survive and hold its head up again in the very competitive world of air lines no matter what mistakes have been made over the years, hind sight is a wonderful conversation subject !

I am talking of the doomsday merchants on this site.

Well, I am in to buy today - hopefully I will get the bargain I am looking for.

[whatsup]

Not ideal for the shareholders that were holding out for dividends, but it makes sense that legally speaking they cancel the dividend as it could have wider impact on the company's potential to continue operating. Either way they were going to have an angry crowd after them, but this at least made more financial sense.

900 million loan isn't too bad either, interest rates a bit higher than anyone would want, but given the risk it seems warranted. It will be for the temporary and in the future they could refinance with a bank at a lower rate.

Don't forget that this stand by draw down facility does not kick in until they have exhausted their own cash and bank facilities, Im betting that they will not want to get deeper into the clutches of a govt no matter how charitable they present themselves!

[winner69]

As Shylock said -

This kindness will I show.
Go with me to a notary, seal me there
Your single bond; and, in a merry sport,
If you repay me not on such a day,
In such a place, such sum or sums as are
Express'd in the condition, let the forfeit
Be nominated for an equal pound
Of your fair flesh, to be cut off and taken
In what part of your body pleaseth me.

Government not as generous as Shlock ..they charging interest ..loan conversion to equity means that pound of flesh is the whole company

[Dassets]

Having done quite a bit of distressed asset financing/investing imo this package works in no way whatsoever. If you give a loan to a distressed entity you don't give a loan that actually dooms them to more intense distress. This package gives the company time to do its downsizing and then the government doesn't have to do it. Should just go into receivership now. Start again and put the real heat on the government. I would expect the secured lenders to have extensive covenant breaches. The new lending probably asked for waivers as a CP. No-way would I waive if I was secured.

[Beagle]

So $900m from Government at exorbitant interest rates

In spite of the words about it being paid back inevitable that it will be converted into equity .....that would a huge dilution of existing shareholders

No divies for a few / many years I would say

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AIR/350298/319205.pdf


Bandaids don't heal cancer.

The Government can borrow at 1%, (I know I just loaned them some money with Kiwibonds at that rate), so yes, the interest rate is exorbitant especially considering (see page 18 and 19 of the 2019 annual report, annual financial results), AIR's other loans vary between 1.0 and 3.1%. I would say the terms are odious considering the normal international finance rates for aircraft.

My sense is this will indeed get converted into equity and it is highly likely that shareholders, (other than the Govt) will be heavily disadvantaged.
Crucially, the $211m a month in cash burn Rob Fyfe was talking about yesterday, sheets home to existing shareholders.
I expect really radical changes to their business plan along the lines of what Qantas announced yesterday with massive staff suspensions.
Crucially, my expectation is demand will exbibit an L shaped recovery after the worst of this virus has run its course and we may see a systemic change in people's propensity to travel and a lot more business being done through electronic means.

If this doesn't go under $1 today I will be doubling my short position. I think the vast majority, if not all the present equity of $2b will be eliminated before this is over.
Govt will step in and convert their loan to equity once the share price goes under 25 cents and the company is on its knees. History will repeat.

Cancelling the dividend and not allowing another one at any stage while AIR is on life support must be a very bitter pill for shareholders.

Agreed, this is a very expensive Band-Aid that probably won't be big enough to cover the wound. I think its highly likely there will be a second tranche of "support", if you can call it that, required.

Shares will probably go into freefall today. Good day for the shorters :t_up:

[Tomtom]

Reading through this the first question I had was to why the dividend wasn't cancelled previously. They've had a few weeks and ample opportunity.

[whatsup]

The Government can borrow at 1%, (I know I just loaned them some money with Kiwibonds at that rate), so yes, the interest rate is exorbitant especially considering (see page 18 and 19 of the 2019 annual report, annual financial results), AIR's other loans vary between 1.0 and 3.1%. I would say the terms are odious considering the normal international finance rates for aircraft.

My sense is this will indeed get converted into equity and it is highly likely that shareholders, (other than the Govt) will be heavily disadvantaged.
Crucially, the $211m a month in cash burn Rob Fyfe was talking about yesterday, sheets home to existing shareholders.
I expect really radical changes to their business plan along the lines of what Qantas announced yesterday with massive staff suspensions.
Crucially, my expectation is demand will exbibit an L shaped recovery after the worst of this virus has run its course and we may see a systemic change in people's propensity to travel and a lot more business being done through electronic means.

If this doesn't go under $1 today I will be doubling my short position. I think the vast majority, if not all the present equity of $2b will be eliminated before this is over.
Govt will step in and convert their loan to equity once the share price goes under 25 cents and the company is on its knees. History will repeat.

Cancelling the dividend and not allowing another one at any stage while AIR is on life support must be a very bitter pill for shareholders.

Agreed, this is a very expensive Band-Aid that probably won't be big enough to cover the wound. I think its highly likely there will be a second tranche of "support", if you can call it that, required.

Shares will probably go into freefall today. Good day for the shorters :t_up:

Beagle, IF that is the case nobody buy nobody will buy today wait until the govt converts ! whites of their eyes !

[Beagle]

Beagle, IF that is the case nobody buy nobody will buy today wait until the govt converts ! whites of their eyes !

It will take a while for shareholders to realise the grim reality of the situation. After the annual result in August and the outlook statement the numbers will show how grim the situation really is.

[Entrep]

50 cents today if not less

[Beagle]

Buying at $1.04 is taking a bet that the virus will only have a short term effect for 4-5 months and there will be a V shaped recovery. I hope that is the scenario that play's itself out but I am substantially more pessimistic than that.

[blackcap]

Look at the crazy sharesies effect. 602 buyers for 100k at $1.03.

[Beagle]

Having done quite a bit of distressed asset financing/investing imo this package works in no way whatsoever. If you give a loan to a distressed entity you don't give a loan that actually dooms them to more intense distress. This package gives the company time to do its downsizing and then the government doesn't have to do it. Should just go into receivership now. Start again and put the real heat on the government. I would expect the secured lenders to have extensive covenant breaches. The new lending probably asked for waivers as a CP. No-way would I waive if I was secured.

Tried giving you some more reputation for that post which is bang on the money but I have to spread it around first which suggests to me that although you don't post often what you do say is often very insightful. Please post more often.

[stoploss]

Buying at $1.04 is taking a bet that the virus will only have a short term effect for 4-5 months and there will be a V shaped recovery. I hope that is the scenario that play's itself out but I am substantially more pessimistic than that.
CMC won’t let me short any more , “ shorting not allowed for this product”. Can only enter a buy , no thanks , have to sit with what I’ve got .

[oldtech]

Damn, there's some ... ahem ... "brave" buyers snapping these up.

Think I'll leave them to it, not brave enough to even nibble at this one yet.

[trackers]

Opened at $1 - last time they were here was 2012

[trackers]

LOL @ morningstar

11139

[Sideshow Bob]

Morningstar valuation at $2.30? What planet are they on?? (Happy to be completely wrong for AIR's sake, but market says otherwise)

[bull....]

guaranteed no dividends to shareholders for years , but the govt have done very well for themselves with the loan arrangement ( in effect shareholders are paying for the loan well d done govt for a good business deal for tax payers)

[oldtech]

$0.925 now .... yeah, still not tempted.

[causecelebre]

Look at the crazy sharesies effect. 602 buyers for 100k at $1.03.

I thought Sharesies aggregated orders...

[blackcap]

I thought Sharesies aggregated orders...

Why would they? No they used to possibly when they only invested in funds. But now you have access to share and limit orders. So they go straight to market as you place them.

[Beagle]

Morningstar valuation at $2.30? What planet are they on?? (Happy to be completely wrong for AIR's sake, but market says otherwise)

Mars :lol: :lol:

[Beagle]

guaranteed no dividends to shareholders for years , but the govt have done very well for themselves with the loan arrangement ( in effect shareholders are paying for the loan well d done govt for a good business deal for tax payers)

Yes...highly likely they will end up ostensibly nationalising the airline for peanuts. Brilliant deal for taxpayers.

[Sideshow Bob]

Mars :lol: :lol:

Concur Beagle, Concur...…

Seriously, do these guys have a dartboard, or do they employ 3 year olds?

Or is this price target in 2025, after a share consolidation??

[whatsup]

Day traders getting slaughtered atm !!

[Landyman]

The Morningstar report was done 9 March, just as COVID was starting to become pandemic - if they wrote the report today, maybe 23c

[oldtech]

Concur Beagle, Concur...…

Seriously, do these guys have a dartboard, or do they employ 3 year olds?

Or is this price target in 2025, after a share consolidation??

Look at the "Last updated" -09/03/20!!

A lot has changed, they might wanna have another look ... just saying

[Lego_Man]

It's a zero. Current shareholders equity is negative.

[Beagle]

Concur Beagle, Concur...…

Seriously, do these guys have a dartboard, or do they employ 3 year olds?

Or is this price target in 2025, after a share consolidation??

:lol: You're in top form today mate...yeah 1:10 share consolidation this time ! Their valuation for ZEL the other day was a really good laugh too at $8.30...I nearly split my sides with laughter :lol:

[bull....]

reminds me of the finance sector collapse. people seduced by the high dividend yield. no dividends for years now the govt will milk there loan for years. i mean 8 - 9% loans lol why would you ever want air to pay it back

[Landyman]

https://www.youtube.com/watch?v=1lWJXDG2i0A

[bottomfeeder]

Its all going to end badly for minority shareholders. Soon they will be trading while insolvent. Then the govt will have to capitaiise those loans as preference shares at a fixed rate. This is a prelude to nationalisation.

[Joshuatree]

So the first skittle has fallen which company is next . Some distressed ultra low cap raises coming.How about AIA.

[bull....]

The challenge is you have to get on top of your cost base. It costs $450m a month to run the airline. The revenue has fallen away very rapidly. You have to cut costs."

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317978


so radical cost cutting might halve the 450m a mth still 900m only gives them probably 6 mths to survive? so im surprised the share price is not 10c today

[Beagle]

What would be really grinding my gears if I was a shareholder is everyone else stands to do well. Govt likely to ostensibly nationalise the company for peanuts and fat cats(apart from Greg Foran with is very slight pay cut of 15%) still scoffing at the food bowl at exactly the same rate as last year despite the airline losing 90% of its business !

Worse, shareholders get nothing by way of dividend while management continue scoffing themselves as fast as they can !

QAN senior executive team working for nothing for at least the rest of the financial year to 30 June 2020. Its time for the fat cats at AIR to lead by example !
They've been gorging themselves for many years, stand and lead by example or do everyone a favour and resign !

Minority shareholders really are on a one way trip to a hiding to nothing !

[Sideshow Bob]

I just purchased some Mitre 10 vouchers with my airpoint dollars. Will be spending on the house/garden before spending on travel.....and thought best to cash up....

[Beagle]

I just purchased some Mitre 10 vouchers with my airpoint dollars. Will be spending on the house/garden before spending on travel.....and thought best to cash up....

Thank you. Next time I am down that way I will do the same. I have no interest in flying anywhere for the foreseeable future and those airpoint dollars could be worthless sometime later this year.

[samjaynz]

I just purchased some Mitre 10 vouchers with my airpoint dollars. Will be spending on the house/garden before spending on travel.....and thought best to cash up....

Yep agree. Will be a trip to Mitre 10 for me tomorrow (or maybe I should shop on the airpoint store to "social distance" instead!) - can't see me booking any flights for the next 6+ months.

[Sideshow Bob]

Thank you. Next time I am down that way I will do the same. I have no interest in flying anywhere for the foreseeable future and those airpoint dollars could be worthless sometime later this year.

$2,000 airpoint dollars can go along way on a new BBQ, stuff for the garden and general other sh1t that you don't really need but think you do!

[ratkin]

Not much of a bailout.

We are preventing you from carrying out your flights, but we will lend you some money.
Big chunk of that should have been given, not loaned.

[stoploss]

Not much of a bailout.

We are preventing you from carrying out your flights, but we will lend you some money.
Big chunk of that should have been given, not loaned.
The reality is there is basically nowhere they can fly to anyway , so even without our border clampdown this would have happened anyway ....

[Raz]

$2,000 airpoint dollars can go along way on a new BBQ, stuff for the garden and general other sh1t that you don't really need but think you do!

i actually had to think hard how to get value out of mine....

[stoploss]

i actually had to think hard how to get value out of mine....

There is plenty of alochol and Icebreaker on there .....

[Tomtom]

Thinking about buying but as a matter of etiquette is it frowned upon to bring your own popcorn to a shareholders meeting? I do love a bit of conflict.

[Balance]

Thinking about buying but as a matter of etiquette is it frowned upon to bring your own popcorn to a shareholders meeting? I do love a bit of conflict.

And why would shareholders complain?

All airlines around the world require some sort of bailout.

[Beagle]

Not much of a bailout.

We are preventing you from carrying out your flights, but we will lend you some money. On very tough commercial terms
Big chunk of that should have been given, not loaned.

$12.1b support package ( including gifts and grants of $600m for the rest of the tourism sector), for the economy including grants left right and centre but lets just let minority shareholders suck up all the collateral damage from our decision to close the border, (including no dividend), and nationalise the airline in due course.

The Govt giveth with one hand and taketh with the other...been happening since Adam was a boy...

Between the Govt and management gorging themselves at the trough minority shareholders are on hiding to nothing. Better to scramble for the emergency exit and realise you can't win in a game where the odds are so heavily stacked against you ! No dividends for many years....

[Sideshow Bob]

Look at the "Last updated" -09/03/20!!

A lot has changed, they might wanna have another look ... just saying

Fair call OT. Although even then it was already $1.95, and was only going to go one-way. Holders here should have been saved by the Beagle and his barking.

Hope they have withdrawn their valuation.

[Beagle]

Fair call OT. Although even then it was already $1.95, and was only going to go one-way. Holders here should have been saved by the Beagle and his barking.

Hope they have withdrawn their valuation.

People who prefer to listen to cats have plenty of time to lick their wounds :eek2:

[Sideshow Bob]

People who prefer to listen to cats have plenty of time to lick their wounds :eek2:

And drink sour milk!

[levin123]

RIP my 200,000 QAN FF Points and $3,000 ish in Air NZ dollars :D. Any wine recommendations? Can probably get a few cases before the points are worthless

[hoyinma]

Any good suggestions for spending air dollars? I have about $1000 to spend today.

[Sideshow Bob]

Any good suggestions for spending air dollars? I have about $1000 to spend today.

I bought Mitre 10 vouchers - dollar for dollar. 5 year expiry.

[levin123]

Any good suggestions for spending air dollars? I have about $1000 to spend today.

All in on the Mt Difficulty Pinot
https://www.airpointsstore.co.nz/wine-and-food/wine/red/MDPN13NZ1/2013-Vintage-Selection.html

[k14]

There is plenty of alochol and Icebreaker on there .....
What about toilet paper or hand sanitiser?

On a serious note, what a time to be sitting on the sidelines watching this unfold. Being quite new to financial markets and investing (don't hold any Air NZ) it is a great learning experience watching it all happen.

[levin123]

What about toilet paper or hand sanitiser?

On a serious note, what a time to be sitting on the sidelines watching this unfold. Being quite new to financial markets and investing (don't hold any Air NZ) it is a great learning experience watching it all happen.

It truly has been fascinating

It clicked for me about 14 days ago when Tom Hanks, several NBA players and several English Premier League footballers and Aust govt minister came out and said they have it. At that stage there were 80 reported cases in Aust, and about 600 in the US and UK each.

But what are the chances of all of these famous people having it when the infection rate is so low?? It's impossible. Then I realised f*** this thing is going to be massive and everyone has it, it's just that famous people are more likely to be tested.

That's when I realised everything is **** and shorted anything I could find

[Zaphod]

I bought Mitre 10 vouchers - dollar for dollar. 5 year expiry.

With the way they're squeezing their suppliers, I personally wouldn't touch them with a barge-pole!

I've got quite a few APD that I had redeemed on flights, but I don't know yet what I'm going to do withe the balance. The AP store represents rather poor value.

[samjaynz]

With the way they're squeezing their suppliers, I personally wouldn't touch them with a barge-pole!

I've got quite a few APD that I had redeemed on flights, but I don't know yet what I'm going to do withe the balance. The AP store represents rather poor value.

Yep it's a bit of a rip off price rise. But figure I'd rather get some useful items (Mitre 10 voucher, new coffee machine etc) than risk losing them as this airline heads for even worse turbulence. All my APD came from reimbursed work travel so it's not like it's costing me anything ... although my dreams of the once-in-a-lifetime free business class roundtrip to Europe are rapidly fading!!

[stoploss]

$ 1.08 ...Beagle you take your short back ?

[hoyinma]

Thanks very much for all your suggestions. Shopping done and happy to be able to.

[Sideshow Bob]

With the way they're squeezing their suppliers, I personally wouldn't touch them with a barge-pole!

I've got quite a few APD that I had redeemed on flights, but I don't know yet what I'm going to do withe the balance. The AP store represents rather poor value.


Probably standard retailer behaviour, especially when expecting a downturn, and seen a huge risk-off currency move on the NZD. Stores are individually owned - and some are pretty substantial owners - so don't have any concerns. Anyway, off topic.

Indeed, not great value, but bit of a bonus when travelling for work and all the weekends have travelled on or been away. Might get some paint and do the house if we get to lockdown stage.
Not going to travel privately for a while.

[peat]

I bought Mitre 10 vouchers - dollar for dollar. 5 year expiry.


good idea , transfer the risk away from AIR. Got myself some winter thermals! Winter is coming!

[Beagle]

$ 1.08 ...Beagle you take your short back ?

No mate...I am clinging on to this short with "dogged" determination. The last bailout was at 25 cents and the funny thing about history, it has a strange habit of repeating ! Greg Foran is too nice a guy and other management don't care and know they will be there forever and a day because Grant Robertson has repeatedly said "we need a national airline". Too big to fail.

Management haven't got the gonads to make the changes they really need to or the will to do so and consequently minority shareholders simply cannot win. In effect, minority shareholders will end up wearing the vast majority of the losses while senior management dine out at their expense and the Govt will soon be back to collecting $500m+ total per annum in PAYE, GST, Tax, Interest and eventually dividends again. Being a minority shareholder in AIR is effectively a mug's game.

[macduffy]

Whatever the rights and wrongs of senior management remuneration Beagle, the fact remains that AIR would quickly become insolvent if it wasn't for the proposed govt funding. I'm sorry for minority shareholders' position but management are powerless to help in these circumstances.

[Beagle]

Whatever the rights and wrongs of senior management remuneration Beagle, the fact remains that AIR would quickly become insolvent if it wasn't for the proposed govt funding. I'm sorry for minority shareholders' position but management are powerless to help in these circumstances.

Admitted as much...that a shutdown was a real risk and this deal was chosen for speed. Their reassurance very recently that they have one billion dollars and have a strong balance sheet, just like they said right before they were bailed out in 2001, was weasel words just like last time. https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12318483

For those that don't have access...a number of analysts have said the support is woefully inadequate and one suggested the airline is un-investable and is headed for nationalisation.

Greg Foran refused to be drawn on how long the $900m will last but did mention it should get them through a few tough months..my guess "few" = 3 months.
With international flights effectively on ice, the most interesting thing in this article was domestic demand was down...wait for it and this is not a typo.. 70% !!
From a business perspective this is ostensibly just a shell of its former self but still carrying the vast majority of its massive fixed costs, staff and overheads. I think they will be back with their begging bowl for more money within 3 months.

[peat]

a number of analysts have said the support is woefully inadequate and one suggested the airline is un-investable and is headed for nationalisation.



Yeh the forthrightness of that surprised me and to say it when the market was trading around a $1 seemed contradictory
but it is probably true.

I might have even considered another short but someone has said its been stopped haha. I doubt the broker is doing that out of kindness so probably de-risking themselves as we all are now.

[mikeybycrikey]

Greg Foran refused to be drawn on how long the $900m will last but did mention it should get them through a few tough months..my guess "few" = 3 months.


Given they are basically shutting down for 3 months (30 March–30 June), I think "a few tough months" is definitely more than 3.

[winner69]

Foran coming in for criticism for not doing much fronting up to the public and saying how bad things really are

Maybe it’s all too hard and who really wants to tell lies and say it’s all OK anyway and don’t worry

AIR in deep deep trouble ....would not surprise me if a statutory manager was iin charge soon.

[Beagle]

Given they are basically shutting down for 3 months (30 March–30 June), I think "a few tough months" is definitely more than 3.

Interestingly our own top expert suggests initial modelling shows Covid 19 won't even peak for 5 months ! https://www.msn.com/en-nz/news/national/how-long-will-coronavirus-last-what-experts-and-world-leaders-say/ar-BB11r7jb?ocid=spartanntp
If it doesn't peak till August how long is the tail, another 5 months ?...then there's the question of how long it will take after that for the public to truly feel safe to fly again ?, maybe sometime in mid-late 2021 ?

I love the suspense of the possibility of a good corporate train wreck, (I am a bad dog), but there's so many to watch on the NZX and this one looks like a forgone conclusion already.

A cynic might suggest this so called rescue plan has been clobbered together with the express intention of nationalising the airline at the cheapest possible price in due course after minority shareholders have been wiped out ! One supposes they won't want to make it look too obvious so they will follow the previous blueprint and step in at 25 cents...again.

[Blue Skies]

I sold 90% of my AIR in late Jan, & mid Feb but kept a few for sentimental reasons. Sold those today at .95 & relieved to be fully out.

Usual optimism at the release of some govt funding but expect reality to set in quickly when people realise that's not going to go far & what then?

[BlackPeter]

Interestingly our own top expert suggests initial modelling shows Covid 19 won't even peak for 5 months ! https://www.msn.com/en-nz/news/national/how-long-will-coronavirus-last-what-experts-and-world-leaders-say/ar-BB11r7jb?ocid=spartanntp
If it doesn't peak till August how long is the tail, another 5 months ?...then there's the question of how long it will take after that for the public to truly feel safe to fly again ?, maybe sometime in mid-late 2021 ?

I love the suspense of the possibility of a good corporate train wreck, (I am a bad dog), but there's so many to watch on the NZX and this one looks like a forgone conclusion already.

A cynic might suggest this so called rescue plan has been clobbered together with the express intention of nationalising the airline at the cheapest possible price in due course after minority shareholders have been wiped out ! One supposes they won't want to make it look too obvious so they will follow the previous blueprint and step in at 25 cents...again.

Sometimes you sort of wonder whether Kiwi ingenuity is really that special. Chinese managed to peak Wuhan province in only 4 weeks (from acknowledging the virus) - and about the same time to get back to Zero. Why oh why do we need to be so slow in all things ... but then, we would not be able to build a 1000 patient hospital in 10 days either, would we?

[blackcap]

Meanwhile in the UK from the FT:

British Airways pilots are to be hit with a 50 per cent pay cut to their basic salary for April and May, split over three months, as the airline becomes the latest to try to cut costs in the wake of the deepening coronavirus pandemic.

The agreement with unions will see BA’s 4,500 pilots required to take two weeks of unpaid leave in each of April and May, with a deduction from basic pay spread over three months.

[blackcap]

Can someone please enlighten me. I am looking at the ANN Report for 2019, and cannot find loyalty points (dollars) anywhere on the liability side of the balance sheet. Is this a bigger problem than I initially thought?

Sorry, I found it under Revenue in Advance. $170m odd.

[klid]

Sold 31 Jan $2.80 buy back 20 March $0.85 O_o

[allfromacell]

After listening to Greg today and seeing the extreme (but necessary) boarder restrictions governments are enforcing across the globe I have to eat humble pie and accept this company is simply uninvestable at this point. How can they possibly pay back 900M in 24 months, this loan will cripple them not to mention the stare of the general economy.

I've sold out today at $1.09 for a sizeable loss and moved it all into OCA at $0.56, in the next 2-3 years OCA will very likely double from here while the same can not be said about the new AIR NZ. Good luck to Greg he's really stumbled into a quagmire and I hope he enjoys a challenge.

[Beagle]

Theme song for minority shareholders https://www.youtube.com/watch?v=LQiOA7euaYA

Greg needs to put the company on a war footing fighting the effects of this virus. Of course it was little bit easier when you could actually see the enemy !
https://www.youtube.com/watch?v=niCG-LDrN9Q

[stoploss]

From the prime Ministers speech today -) Risk is contained but the risk is growing due to increased cases. People will need to work differently and cancel unnecessary travel.
This will make a big dent in local flights as the move to travel in NZ & spend your money locally has been snuffed out .....
disc : Short

[Beagle]

Domestic bookings are already down 70% according to Greg Foran yesterday. Now that we are at alert level 2 and the PM has advised Kiwi's to avoid domestic travel unless absolutely essential, I would think they might have 10-15% of their domestic market left plus freighter flights for goods overseas, perhaps 5% of their international market.

I really don't understand why anyone thinks there is still $1 per share in value left. Rob Fyfe was talking that they were burning $211m a month earlier this week and things have got a lot worse since then. I doubt the $900m will last them through to the end of this financial year. Another loan of $900m to get them through Q1 FY21, (Ministry of health predicts the peak of Covid 19 to not occur until August 2020), so based on best medical information and advice Q1 FY21 is going to be an absolute disaster for AIR as well. So by the 30 Sept 2020 I estimate it is quite probable they will have burned through the next loan tranche of $900m. There was only just on $2b of equity as at 31/12/2019.

The Oct-Dec 2020 period is also likely to be extremely challenging for AIR with substantial losses even if this virus peaks in August.

I really don't see any other outcome than this being an existential event for minority shareholders of AIR. Nationalisation of the airline is the only realistic possibility I can foresee. Disc: Short.

[couta1]

Shorting in Aussie has been cut down by the regulators and should not be allowed full stop at times like this IMO, in a normal market it provides a balance but in the current market it creates an unwanted distortion. In fact there is merit in a complete market shutdown to create a level playing field that puts people before greed.

[stoploss]

Shorting in Aussie has been cut down by the regulators and should not be allowed full stop at times like this IMO, in a normal market it provides a balance but in the current market it creates an unwanted distortion. In fact there is merit in a complete market shutdown to create a level playing field that puts people before greed.

Arguably you could say the people trying to snaffle up "cheap" shares by the bucket load are being greedy ... 2 sides to this coin.

[aquaman]

Just spent my couple of thousand airpoints at mitre 10 so have a project to do at home if/when lockdown occurs. Also means not concerned about potentially having them frozen or taken from me. Do wonder if that is likely

[winner69]

Shorting in Aussie has been cut down by the regulators and should not be allowed full stop at times like this IMO, in a normal market it provides a balance but in the current market it creates an unwanted distortion. In fact there is merit in a complete market shutdown to create a level playing field that puts people before greed.

Some say shorting is immoral but whatever ‘shorters’ are unpopular.

Like the ‘short and distort’ phrase in this Forbes piece


https://fortune.com/2018/06/23/why-short-selling-shorts/

Argument

Critics say short sellers can transform downturns into full-blown panics. They also point to the ability of shorts to hoodwink investors by spreading false rumors before exiting a trade, a technique known as “short and distort.”

[skid]

Shorting in Aussie has been cut down by the regulators and should not be allowed full stop at times like this IMO, in a normal market it provides a balance but in the current market it creates an unwanted distortion. In fact there is merit in a complete market shutdown to create a level playing field that puts people before greed.

I remember them doing a similar thing back in the GFC when things got out of hand.....For those who were around memories of those days are an asset

[Baa_Baa]

I remember them doing a similar thing back in the GFC when things got out of hand.....For those who were around memories of those days are an asset

There is one massive difference between the GFC and current market price action, see if you can pick what that difference is. These are the DOW Monthly bars:

[Lego_Man]

I don't know why people rail against shorters.

At the end of a selloff, the first buyers are actually people covering their shorts - this provides liquidity and price discovery to a market. The nature of shorting means that you have to monetise your position much earlier than a long would (shorting has a max 100% gain, being long has a potential unlimited gain). This is why you also get big short-covering rallies during bear markets that actually allow longs to exit at a better price.

Shorters also have other risks to contend with like takeover bids for companies you are short (providing a brutal loss) or government intervention.

If you had done any actual shorting you would realise it's a tough game, it's not freewheeling predators screwing everyone else. And anyone short Air NZ is doing the world a favour by expediting the share price's journey to its current real value (zero).

[Beagle]

I don't know why people rail against shorters.

At the end of a selloff, the first buyers are actually people covering their shorts - this provides liquidity and price discovery to a market. The nature of shorting means that you have to monetise your position much earlier than a long would (shorting has a max 100% gain, being long has a potential unlimited gain). This is why you also get big short-covering rallies during bear markets that actually allow longs to exit at a better price.

Shorters also have other risks to contend with like takeover bids for companies you are short (providing a brutal loss) or government intervention.

If you had done any actual shorting you would realise it's a tough game, it's not freewheeling predators screwing everyone else. And anyone short Air NZ is doing the world a favour by expediting the share price's journey to its current real value (zero).

Well said !!

[Jaa]

Bit of good news from last week. The government is covering some of the airlines government charges as part of the aviation support package.


Financial support to airlines to pay passenger-based government charges for the next 6 months ($163 million) and to cover Airways related fees for the next six months ($37 million),
Any fee rises or pricing reviews from agencies that charge fees at the border (Ministry for Primary Industries, Civil Aviation Authority, Aviation Security Service, Customs, Airways) are put on hold for 12 months Source (https://www.nznewsuk.co.uk/business/?id=76433)

You can also expect airfare costs to rocket in price. As all those fixed costs get spread across a much smaller number of tickets. NZ public won't like that but it's unavoidable.

[dobby41]

I don't know why people rail against shorters.


Because it turns what should be a market into a gambling den.

[Beagle]

So its okay for people to take heavily leveraged long positions but an unleveraged short position is gambling ? Yeah, whatever...

[stoploss]

Because it turns what should be a market into a gambling den.
You sound like you think the market should only go up . A real market goes up and down , so what’s wrong with being able to make money when things go down ?

[Beagle]

Many people have read accounts of billionaires who try and crash a companies stock price by shorting vast amounts of its stock, spreading disinformation and then taking advantage of the situation and cashing out.

I think we need to make a distinction between that sort of activity and some investors taking a small short position here because they honestly believe the airline in its current form will fail and hence that short position is considered to be an ideal hedge against other modest long positions in the market.

I am not spreading disinformation. My real quick and rough back of the envelope calculation showed estimated annual losses of at least $1,585m and I suggested the true figure was probably a bit higher BUT was exceeded by Rob Fyfe CEO of the airlines CEO for 7 years who estimated their monthly operating loss at $211m = $2,532m, nearly one billion dollars per annum higher than my estimate. I think he would have a much better handle on the situation that I would.

Since his estimate the borders have been shut and the Govt have recommended against all non essential domestic travel so its crystal clear their monthly operating loss going forward will be significantly higher than $211m ! I estimate it at circa $300m per month.

[dobby41]

You sound like you think the market should only go up . A real market goes up and down , so what’s wrong with being able to make money when things go down ?

Why does it sound like that?
I'm talking about betting it's going to go down.

[blackcap]

Many people have read accounts of billionaires who try and crash a companies stock price by shorting vast amounts of its stock, spreading disinformation and then taking advantage of the situation and cashing out.

I think we need to make a distinction between that sort of activity and some investors taking a small short position here because they honestly believe the airline in its current form will fail and hence that short position is considered to be an ideal hedge against other modest long positions in the market.

I am not spreading disinformation. My real quick and rough back of the envelope calculation showed estimated annual losses of at least $1,585m and I suggested the true figure was probably a bit higher BUT was exceeded by Rob Fyfe CEO of the airlines CEO for 7 years who estimated their monthly operating loss at $211m = $2,532m, nearly one billion dollars per annum higher than my estimate. I think he would have a much better handle on the situation that I would.

Since his estimate the borders have been shut and the Govt have recommended against all non essential domestic travel so its crystal clear their monthly operating loss going forward will be significantly higher than $211m ! I estimate it at circa $300m per month.

No need to justify your short position with the billionaire example.

You could just as equally argue that "people have read accounts of billionaires who try and increase a companies stock price by buying vast amounts of its stock, spreading disinformation and then taking advantage of the situation and cashing out". Using that argument one could theories that going "long" in a stock should be banned :)

[blackcap]

Why does it sound like that?
I'm talking about betting it's going to go down.

That's like buying a stock because you think it will go up. Or do you only buy stocks that you think will stay the same?

[Beagle]

No need to justify your short position with the billionaire example.

You could just as equally argue that "people have read accounts of billionaires who try and increase a companies stock price by buying vast amounts of its stock, spreading disinformation and then taking advantage of the situation and cashing out". Using that argument one could theories that going "long" in a stock should be banned :)

Classic. Thanks for that :)

[dobby41]

That's like buying a stock because you think it will go up. Or do you only buy stocks that you think will stay the same?

Fair comment

[blackcap]

There are currently 1,000 different orders to buy AIR at 93 cents. There are a lot of people on Sharesies one feels.

[Baa_Baa]

I think we need to make a distinction between that sort of activity and some investors taking a small short position here because they honestly believe the airline in its current form will fail and hence that short position is considered to be an ideal hedge against other modest long positions in the market.

A short position is no good unless the shares sold are bought back (covered), if the company fails - literally, and the short position is still open, then the trade is worthless.

[blackcap]

A short position is no good unless the shares sold are bought back (covered), if the company fails - literally, and the short position is still open, then the trade is worthless.

If the company falls over then you have made big money. If the company is not there anymore then the stock does not exist and there is no obligation to buy back stock that is non-existent. Even then if the company does fail I am sure some current stockholders will be happy to take 1 cent for their share and you can then buy these and pay your obligation to the entity you borrowed the stock from.

[Lego_Man]

A short position is no good unless the shares sold are bought back (covered), if the company fails - literally, and the short position is still open, then the trade is worthless.

That's a myth.

[Beagle]

Plenty of time to close this out in due course when they're close to worthless. Government will be very keen (its election year), when the $900m runs out to show more "support" for the airline. Nationalisation is a dirty word and conceptually an extremely bad look for Labour and they will be very keen to avoid that.

I expect they will do a rinse and repeat of the 2001 bailout with bigger numbers. When the share price goes under 25 cents they will announce their previous $900m will be converted to equity and another $900m injected as well. Massive cash issue coming at 25 cents to raise about $2b.. N.Z. Govt will end up with approx. 90% of the airline this time by my indicative back of the envelope calculations, (but will be keen to be seen to be showing support as opposed to simply nationalising the airline).

The ugly truth is minority shareholders are the sacrificial goat here and are being sold down the river with the $900m "support" package at a very high interest rate.

[whatsup]

Day traders getting slaughtered atm !!

Another day when D Ters are getting slaughtered, falling knife et al !!.

[silverblizzard888]

Gee is there news or not, why does AIR keep halting.

Also whats interesting is that over a 1000 buyers today but their average is a few hundred shares, while sellers are on average selling tens of thousands of shares.

Whos the smart money lol, small retail shareholders or the large investors and institutions currently selling.

[Beagle]

I was wondering that ? Why is AIR being halted ? Circuit breakers applying just to AIR ?

[stoploss]

I was wondering that ? Why is AIR being halted ? Circuit breakers applying just to AIR ?

92/92.5 looks ok at moment

[Scrunch]

Is this development the start of the recovery of air travel?
https://www.cnbc.com/2020/03/21/fda-grants-emergency-use-coronavirus-test-that-can-deliver-results-in-45-minutes.html

I know the article only talks about medical screening, but it could be done in an airport. International check-in procedures are 3-hours. With a 45 minute test you could pre-screen every individual before they enter the plane and potentially after they exit. It says medical expertise is not needed to do the test.

What would the public health risk be of a plane load of tourists to NZ with tests confirming they are virus free?

[Xerof]

Gee is there news or not, why does AIR keep halting.

Also whats interesting is that over a 1000 buyers today but their average is a few hundred shares, while sellers are on average selling tens of thousands of shares.

Whos the smart money lol, small retail shareholders or the large investors and institutions currently selling. a pathetic attempt by the BOT's to make it appear bid. Failed

[stoploss]

Is this development the start of the recovery of air travel?
https://www.cnbc.com/2020/03/21/fda-grants-emergency-use-coronavirus-test-that-can-deliver-results-in-45-minutes.html

I know the article only talks about medical screening, but it could be done in an airport. International check-in procedures are 3-hours. With this you could pre-screen every individual before they enter the plane and potentially after they exit.

What would the public health risk be of a plane load of tourists to NZ with tests confirming they are virus free?

A lot of people have tested negative , then subsequently developed it . So it's not foolproof , so still a risk as it maybe incubating and they are not virus free....

[blackcap]

a pathetic attempt by the BOT's to make it appear bid. Failed

It's not bots. Its actual retail investors who use a platform found at sharesies.com. You get charged a % for brokerage but there is no minimum brokerage. You also can purchase fractional shares. So if you wanted to you could place an order for $2 worth of SPK shares and pick up half a share.

[causecelebre]

It's not bots. Its actual retail investors who use a platform found at sharesies.com. You get charged a % for brokerage but there is no minimum brokerage. You also can purchase fractional shares. So if you wanted to you could place an order for $2 worth of SPK shares and pick up half a share.

Are you trading the order book?

[blackcap]

Are you trading the order book?

No I am not, and I am not 100% sure its sharesies, but the activity sure looks like it.

[whatsup]

.85 atm still a falling knife .

[skid]

Im kind of surprised it didnt bounce on bailout news..........................Just as a matter of interest...about the time I bid farewell it was around this priice............................but heck ...if the government is backing it ,at least we know its not going down

[blackcap]

Im kind of surprised it didnt bounce on bailout news..........................Just as a matter of interest...about the time I bid farewell it was around this priice............................but heck ...if the government is backing it ,at least we know its not going down

But it was not really a bailout was it. It was a loan for 3 months of working capital at onerous conditions. So in the end that will be converted to equity at terms that will not be favourable to existing shareholders. That is my reading of it anyway.

[Beagle]

Goes in and out of a trading halt all day. Its being circuit breaker protected...I am not sure under what jurisdiction or mechanisms. Why are they not protecting shares that have fallen further in the tourism sector like THL ? Pretty obvious the shares are worthless in the current environment. Getting my Mitre Ten vouchers with airpoints tomorrow before the lockdown and collapse.

[steveb]

Goes in and out of a trading halt all day. Its being circuit breaker protected...I am not sure under what jurisdiction or mechanisms. Why are they not protecting shares that have fallen further in the tourism sector like THL ? Pretty obvious the shares are worthless in the current environment. Getting my Mitre Ten vouchers with airpoints tomorrow before the lockdown and collapse.
Vouchers! are you sure Mitre 10 are going to be around for you to use them?

[dobby41]

Getting my Mitre Ten vouchers with airpoints tomorrow before the lockdown and collapse.

Can you buy vouchers with the Airpoints?

[blackcap]

Can you buy vouchers with the Airpoints?

Not in store you can't from what I understand. But I went to the AIRnz shop online and managed to buy them. They are for fixed amounts, the largest denominated one is for $500. But you might be able to buy more than 1. They email you the voucher within 2 days.

[Gerald]

Does anyone know what is happening regarding all the domestic travel booked in the next 4 weeks? You can still book flights online, but surely you would have to prove your travel is essential and planes will be half empty?

[dobby41]

Not in store you can't from what I understand. But I went to the AIRnz shop online and managed to buy them. They are for fixed amounts, the largest denominated one is for $500. But you might be able to buy more than 1. They email you the voucher within 2 days.

Thanks - I didn't know that.
Off to the shop.

[iceman]

Thanks - I didn't know that.
Off to the shop.

You can also pay for the stuff you buy at Mitre 10 partly or totally using Airpoints. Just need your Airpoints card and a photo ID

[Beagle]

Thanks - I didn't know that.
Off to the shop.

They have stopped selling Mitre Ten e-vouchers online under the auspices of its not right to sell these that require redemption in store due to Covid 19 concerns. WTF ?
I think this is very poor as these vouchers have a shelf life far longer than AIR under their current business model and there is no requirement to spend the vouchers within a certain amount of time. I do not have the time to wander around Mitre ten at present with hordes of others panic buying their home renovation products because they want something to do at home for the next month or two.

[RupertBear]

You can also pay for the stuff you buy at Mitre 10 partly or totally using Airpoints. Just need your Airpoints card and a photo ID

thanks for that, I did not know this

[mfd]

You can also order products from the airpoints store. I cashed mine out and turned it into a new compass and some booze.

[blackcap]

You can also order products from the airpoints store. I cashed mine out and turned it into a new compass and some booze.

The majority of those other products are a rip-off though. $39.99 for 4, 45g, bars of chocolate. No thanks.

[Sideshow Bob]

They have stopped selling Mitre Ten e-vouchers online under the auspices of its not right to sell these that require redemption in store due to Covid 19 concerns. WTF ?
I think this is very poor as these vouchers have a shelf life far longer than AIR under their current business model and there is no requirement to spend the vouchers within a certain amount of time. I do not have the time to wander around Mitre ten at present with hordes of others panic buying their home renovation products because they want something to do at home for the next month or two.

Certainly Mitre 10 was crazier than the supermarket here yesterday. Shedload of DIY going on.

Ironic thing I was earning airpoint dollars while spending my voucher, bought with airpoint dollars.....

[blackcap]

They have stopped selling Mitre Ten e-vouchers online under the auspices of its not right to sell these that require redemption in store due to Covid 19 concerns. WTF ?
I think this is very poor as these vouchers have a shelf life far longer than AIR under their current business model and there is no requirement to spend the vouchers within a certain amount of time. I do not have the time to wander around Mitre ten at present with hordes of others panic buying their home renovation products because they want something to do at home for the next month or two.

I think AIR may have had a quiet word to Mitre 10....

[peat]

I got my Mitre 10 voucher yesteereday and I quote from the associated email



Gift cards are redeemable for goods and services sold at Mitre 10 stores in New Zealand, and on the Mitre 10 (https://www.mitre10.co.nz/) website.



so that's a full on bogus excuse not to sell them

[blackcap]

I got my Mitre 10 voucher yesteereday and I quote from the associated email



Gift cards are redeemable for goods and services sold at Mitre 10 stores in New Zealand, and on the Mitre 10 (https://www.mitre10.co.nz/) website.



so that's a full on bogus excuse not to sell them

Like I said, AIR have had a word and are worried about liquidity issues perhaps.

[steveb]

Even if you buy online your purchase won't go anywhere until after the lockdown is lifted.Courier companies will only service essential products only.So AIR are correct in this instance

[Beagle]

I got my Mitre 10 voucher yesteereday and I quote from the associated email



Gift cards are redeemable for goods and services sold at Mitre 10 stores in New Zealand, and on the Mitre 10 (https://www.mitre10.co.nz/) website.



so that's a full on bogus excuse not to sell them

Yeah, their excuse has all the credibility of a $3 bank note.

[macduffy]

Is this the AIR thread or the Airpoints thread?

;)

[skid]

Is this the AIR thread or the Airpoints thread?

;)

Its the minds attempt to block out the last week.....otherwise..''Fools rush in ...where wise men fear to thread''

[macduffy]

Its the minds attempt to block out the last week.....otherwise..''Fools rush in ...where wise men fear to thread''

Indeed, skid!

Anything to take minds off ……….. what was that company called?

:ohmy:

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12320015 I have never seen a corporate jet with "business" class seats that small !
No wonder bigger folks on long haul choose to travel business class with another airline !

[Raz]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12320015 I have never seen a corporate jet with "business" class seats that small !
No wonder bigger folks on long haul choose to travel business class with another airline !

Yes their business class is below average I'm sorry to say....might be a while before you can try it for yourself Beagle

[samjaynz]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12320015 I have never seen a corporate jet with "business" class seats that small !
No wonder bigger folks on long haul choose to travel business class with another airline !

Yes Air NZ famous for a sub-par business class experience (food is good though, and crew usually very nice) from my odd go at it through work.

I'm more of a "poor man's business class" flyer - get the economy seat with the best leg room (for example on Singapore Airlines A350 there is a row in the main economy cabin which has a window seat with no seat in front of it ... that's all this peasant needs.

[Sideshow Bob]

Guess could get some extra capacity by stacking a few pallets in the Aisles...….

Media release
26 March 2020



Air New Zealand ramps up cargooperations
Air New Zealand Cargo is offeringimporters and exporters a range of charter options to keep cargo moving to andfrom New Zealand during the COVID-19 outbreak.

Air New Zealand General Manager CargoRick Nelson says the airline has introduced a number of innovative measures tokeep Kiwi businesses connected to the world.

“We’re offering our cargo customers arange of aircraft charter services covering every port on the Air New Zealandnetwork (excluding London). We have also been able to provide customisedoptions from North American markets through to Australia.

“With our Boeing 787-9 Dreamlineraircraft for example, we have the ability to uplift 11 cargo pallets in eachdirection we fly. Each of these pallets can take up to 12 cubic metres involume and up to 4600 kilograms in weight.

“We’ve shared these options with ourglobal cargo customer base and are getting some strong interest from customerswanting to ship to and from Shanghai, Hong Kong, San Francisco, Los Angeles,Sydney and Melbourne.

“We’ve also introduced the concept of a‘Multi Party Charter Agreement’ which has been designed to help small andmedium sized exporters and importers to ensure they have options available tothem to move their goods in these challenging times. Under this model, ourcustomers can purchase a single airfreight pallet position on a charter flight,or by working together with a freight forwarder, a coalition of exporters andimporters can potentially combine and consolidate their shipments so that theyare able to purchase a single unit on the aircraft.

“This is undoubtedly an extremelydifficult time for our airline with a significant reduction in capacity due toreduced travel demand, but we are pleased to be able to keep New Zealandconnected to the world in this way.”

At the same time, Air New Zealand isworking with the Government to ensure critical cargo transport lines aremaintained.

Ends

[Flugenbear]

I'm really amazed the share price is holding up. Due to the approach our govt is taking there could be next to no flying for ANZ until there is a vaccine for Covid 19. We might stop it here, but the rest of the world is not taking that approach. That means our borders remain closed.
So, why is the share price almost a buck when there is no sign of any light at the end of the tunnel. Not even
a glimmer.

[Beagle]

Yes their business class is below average I'm sorry to say....might be a while before you can try it for yourself Beagle

Have tried it once and was most underwhelmed. They had a display of the Dreamliner seats at Te Papa many years ago, to commemorate the 75th anniversary of AIR. I sat in the new "business class" seat there and was really shocked with how cramped it was. No way this fat dog could sleep in that half open sardine can.

[Beagle]

I'm really amazed the share price is holding up. Due to the approach our govt is taking there could be next to no flying for ANZ until there is a vaccine for Covid 19. We might stop it here, but the rest of the world is not taking that approach. That means our borders remain closed.
So, why is the share price almost a buck when there is no sign of any light at the end of the tunnel. Not even
a glimmer.

I estimate they have less than 10% of their business left by mileage flown but still have the vast majority of their fixed overheads. At present the market does not appear to understand how quickly they are burning cash, (my estimate $300m a month) and is taking a very benign view of the duration of this virus and expecting a V shaped recovery in travel demand. I foresee how things are going to pan out, very differently.

[Onion]

A $1.05bn loan secured by Qantas to help the airline see through the coronavirus crisis has sent its share price soaring, closing up 26 per cent at $3.27.Provided by 10 local and offshore lenders including Australia’s big four banks, the loan was made against seven near new Boeing 787-9 aircraft for which Qantas paid cash.
At a time when money could be hard to come by, Qantas chief executive Alan Joyce said there was no shortage of lenders willing to assist.
“It shows you how people view Qantas. Because of the tough decisions we’ve made over the last decade, people are seeing us as the top airline out there that they want to lend to,” Mr Joyce said.
“They see us an airline that’s in a great strategic position They see us as one of the survivors.”
To be paid back over 10 years at an interest rate of 2.75 per cent, the loan will lift the cash balance for the Qantas Group to $2.95bn, with an additional $1bn undrawn facility available.
In comparison, a $900m loan secured by Air New Zealand from the New Zealand government was to be paid back in 24 months at an interest rate of 8 per cent.


From The Australian today. Qantas funding interest rate much lower than AIR’s.

[JohnnyTheHorse]

Have tried it once and was most underwhelmed. They had a display of the Dreamliner seats at Te Papa many years ago, to commemorate the 75th anniversary of AIR. I sat in the new "business class" seat there and was really shocked with how cramped it was. No way this fat dog could sleep in that half open sardine can.

It's embarrassing compared to some competitor offerings. Cant beat Qatar Qsuite if going to Europe.

[dreamcatcher]

Can someone confirm UBS recent $0.40c TP for AIR.............

[Chinesekiwi]

[/FONT][/COLOR]
[/FONT][/COLOR]

From The Australian today. Qantas funding interest rate much lower than AIR’s.


Just a minor correction.

Air NZ has from the govt.

$600m at 7%
$300m at 9%

Still QANTAS has a great deal.

[Chinesekiwi]

It's embarrassing compared to some competitor offerings. Cant beat Qatar Qsuite if going to Europe.


Yes the Dreamliner Business Prem seat is sub par.

Pre this virus there was (maybe still is) a project to re imagine the entire pointy end. Much like the 2004/5 project which launched the now dated Herringbone Business class seats which were a winner for a long time.

[winner69]

[/FONT][/COLOR]
[/FONT][/COLOR]

From The Australian today. Qantas funding interest rate much lower than AIR’s.

Qantas lending has real airplanes (nearly new) as collateral ......Govt lending to AIR backed by ‘hope’

[stoploss]

Qantas lending has real airplanes (nearly new) as collateral ......Govt lending to AIR backed by ‘hope’
The Govt already owns 50 % of their planes & an option on more - well the ones that aren't leased .

[Flugenbear]

Can someone confirm UBS recent $0.40c TP for AIR.............
Not sure dreamcatcher, but I think that's more realistic as to where the market is pricing this.
I don't think investors have woken up to the fact the aviation industry will not be same when we emerge from this pandemic.
The best case scenario is we get a vaccine in a years time. Then slowly the industry recovers.
My guess AIR will need another billion. I think in the coming months there will be mass layoffs, well beyond the current 30%, which will help stem the bleeding of cash. Either way, it's not a pretty picture.

[steveb]

I expect huge demand from corporate's as soon as they can get off the ground,but apart from that it's going to be pretty grim for AIR,the public have been fed a continuous barrage of news about how the virus was spread from people travelling by air.The general public are going to be very wary of air travel for a good time to come.

[Zaphod]

From our perspective, we are likely to keep our corporate policy highly conservative for 6-12 months subsequent to the travel restrictions being lifted. Even then, I think video conferencing will become the norm with F2F being the exception. Still early days yet though.

[Chinesekiwi]

Not sure dreamcatcher, but I think that's more realistic as to where the market is pricing this.
I don't think investors have woken up to the fact the aviation industry will not be same when we emerge from this pandemic.
The best case scenario is we get a vaccine in a years time. Then slowly the industry recovers.
My guess AIR will need another billion. I think in the coming months there will be mass layoffs, well beyond the current 30%, which will help stem the bleeding of cash. Either way, it's not a pretty picture.


Correct and the CEO has flagged last week that the 30% will be well exceeded.

Lease aircraft will go.

[winner69]

I expect huge demand from corporate's as soon as they can get off the ground,but apart from that it's going to be pretty grim for AIR,the public have been fed a continuous barrage of news about how the virus was spread from people travelling by air.The general public are going to be very wary of air travel for a good time to come.

I would think that corporates being very risk adverse whe it comes to air travel ...and it will take years to get back to the days when every man and his dog thought they were indispensable and had to jet everywhere

[Beagle]

It's embarrassing compared to some competitor offerings. Cant beat Qatar Qsuite if going to Europe.

I think that's a very fair comment. Really the nightmare liner has these 3 classes of seats, (Marketing term then fair description)
Business Premier = premium economy
Premium economy = normal economy
economy = we really mean it, this is as economical seating as we can possibly get away with.

Also really embarrassing is the up to 9% interest rate AIR is being charged, (when the Govt can borrow as low as 0.5% with Kiwi Bonds) v Qantas at 2.75%.
N.Z. Govt are effectively clipping their wings.

[peat]

... and you cant really blame Greg

I'm hoping that Govt are trying to justify this to the public by being so business minded, but I fear it is a lifeline round the throat for govt control

[winner69]

Loan terms were negotiated on an arms length basis with independent advisors ....whatever that means

Shylock rates because they really stuffed ....go to lender of resort and hope he’s not to tough.

What govt borrows at and what aussie banks lend to Qantas at irrelevant ..except a sign of the desperate situation AIR is in

[Beagle]

... and you cant really blame Greg

I'm hoping that Govt are trying to justify this to the public by being so business minded, but I fear it is a lifeline round the throat for govt control

I have a theory that at that moment in time Labour did not want to be seen as propping up big business unless it was on arms length commercial terms. Since then they seem to have had a rethink and propping up any business that keeps people employed is seen as being politically correct.

[mikeybycrikey]

Loan terms were negotiated on an arms length basis with independent advisors ....whatever that means

Shylock rates because they really stuffed ....go to lender of resort and hope he’s not to tough.

What govt borrows at and what aussie banks lend to Qantas at irrelevant ..except a sign of the desperate situation AIR is in

I guess this buys them time. It gives them certainty for a few months, which should be enough time to either sort out a rights issue or alternative finance. I'm sure they are looking at both of those options right now for the near future.

[Beagle]

Singapore airlines one of the first cab's off the rank with a massive deeply discounted rights issue. https://www.theedgesingapore.com/news/covid-19/singapore-airlines-raise-15-bil-rights-issue-new-shares-mandatory-convertible-bonds

Check out how much of their fleet is currently grounded !

[Jaa]

Interesting article from Bloomberg on which airlines might not survive and how long cash reserves may last. Annoyingly has left off Air NZ.

The Airlines Most in Danger of Going Under During the Crisis (https://www.bloomberg.com/news/articles/2020-03-26/the-airlines-most-in-danger-as-virus-inflicts-252-billion-blow?srnd=premium-asia)

[Cadalac123]

Changes of a capital raising at 0.20c ?

[thedrunkfish]

I have a theory that at that moment in time Labour did not want to be seen as propping up big business unless it was on arms length commercial terms. Since then they seem to have had a rethink and propping up any business that keeps people employed is seen as being politically correct.

I think your wrong there mate! Propping up businesses that keep the economy running more like. In essence buying time to allow us to knock the bastard off and still have businesses to function afterwards.

I'm interested to know what you think is a better option? Let them all go belly up?

[Beagle]

I think your wrong there mate! Propping up businesses that keep the economy running more like. In essence buying time to allow us to knock the bastard off and still have businesses to function afterwards.

I'm interested to know what you think is a better option? Let them all go belly up?

The support would have been exactly that if it was on normal commercial terms that AIR borrow at, their external loans range from 1.0 - 3.0%. Unwittingly or otherwise, AIR is on a direct flight path to what will ostensibly amount to nationalisation.

[peat]

Singapore airlines one of the first cab's off the rank with a massive deeply discounted rights issue. https://www.theedgesingapore.com/news/covid-19/singapore-airlines-raise-15-bil-rights-issue-new-shares-mandatory-convertible-bonds



Temasek is Singapore Super Fund isn't it? so its comin from the guvmint.

Edit Answer the questions

Yes it was started in '74 to manage Singapore's assets and is solely owned by the Minister of Finance (Singapore). Operates on a commercial basis and the a majority shareholder in SIA.
(So its a very similar situation in a way to us really !)

[macduffy]

The support would have been exactly that if it was on normal commercial terms that AIR borrow at, their external loans range from 1.0 - 3.0%. Unwittingly or otherwise, AIR is on a direct flight path to what will ostensibly amount to nationalisation.

Perhaps. But a privately owned airline, facing the virtual shutdown of its operations for an extended time, would fold and go out of business in these circumstances. I'm no fan of nationalisation but a national airline is essential for NZ's economy in 2020.

Disc: I don't invest in airlines.

[Cadalac123]

A lot of people in the general public have been loading up on these.. flavour of the month

[Baa_Baa]

A lot of people in the general public have been loading up on these.. flavour of the month

Do you know for a fact that “a lot of people in the general public” who have been “loading up” on this? Or just an opinion? I reckon they’re mugs if they have and going to be lambs to the slaughter soon enough.

AIR is in big trouble, soothing the cashflow for the meantime, with a modest government injection will lasting a few weeks is one thing, but the balance sheet damage will be long lasting.

I’m with Beagle on this one, it’s a train wreck, sadly through no fault of its own except maybe not moving quickly enough to quarterise the damage. Whole business is basically shutting down!

[samjaynz]

Do you know for a fact that “a lot of people in the general public” who have been “loading up” on this? Or just an opinion? I reckon they’re mugs if they have and going to be lambs to the slaughter soon enough.

AIR is in big trouble, soothing the cashflow for the meantime, with a modest government injection will lasting a few weeks is one thing, but the balance sheet damage will be long lasting.

I’m with Beagle on this one, it’s a train wreck, sadly through no fault of its own except maybe not moving quickly enough to quarterise the damage. Whole business is basically shutting down!

A lot of the millennial Sharesies brigade I know have been buying in.

There is a genuine belief that any share/stock at a discount to it's recent performance is a "good buy".

[Stranger_Danger]

A lot of the millennial Sharesies brigade I know have been buying in.

There is a genuine belief that any share/stock at a discount to it's recent performance is a "good buy".

I just wish there was an easy and direct way to short the Sharesies customer database.

[Baa_Baa]

A lot of the millennial Sharesies brigade I know have been buying in.

There is a genuine belief that any share/stock at a discount to it's recent performance is a "good buy".

Thanks for posting, if that’s the true situation then there are likely to be a lot of disappointed shareholders about to be awoken to the effects of a massive share price drop, then an equally upsetting solution as the government moves to take control. It’s only at the absolute bottom, assuming AIR even remains a listed company that new punters position for the future. Current shareholders will be wiped out as they were last time AIR failed.

[samjaynz]

I just wish there was an easy and direct way to short the Sharesies customer database.

Funny you mention this. We all know the story about when the shoe shine boy gives you stock tips you sell. Late last year and right up until about 5 weeks ago I started seeing a whole load of friends on Instagram, Facebook etc "preaching the word" about Sharesies. That should have been a MASSIVE signal for me to get out. Luckily I had sold a fair bit of my holdings before then ... but I liken it to a modern day version. "When the Instagram influencer is flogging his Sharesies referral code, sell up ASAP!"


Thanks for posting, if that’s the true situation then there are likely to be a lot of disappointed shareholders about to be awoken to the effects of a massive share price drop, then an equally upsetting solution as the government moves to take control. It’s only at the absolute bottom, assuming AIR even remains a listed company that new punters position for the future. Current shareholders will be wiped out as they were last time AIR failed.

Agreed. But all they see is "stocks on sale" (their words, not mine). I actually think there are some oversold bargains in current climate but Air NZ ain't one. Air travel buggered for ages. I went so far as to spend up all my airpoints on mitre 10 vouchers and wine as I'm so sure this is going down further.

[peat]

its not just the Millenial Sharesies Brigade

11161

[dubya]

11161

Whereabouts on the Direct Broking site did you get that information please peat!?

[peat]

Whereabouts on the Direct Broking site did you get that information please peat!?

It is publicly available too! You dont even need a login to see it.
Not that I would base any decision around that one piece of info. But occasionally its interesting.

11162

[dubya]

Got it. Thanks

[Chinesekiwi]

I think your wrong there mate! Propping up businesses that keep the economy running more like. In essence buying time to allow us to knock the bastard off and still have businesses to function afterwards.

I'm interested to know what you think is a better option? Let them all go belly up?

Think I agree with your perspective on this one - the govt' has flashed it's business credentials and it speaks to Air NZ's financials as Greg Foran mentioned that they wouldn't have got a better deal from banks.

[JeremyALD]

Funny you mention this. We all know the story about when the shoe shine boy gives you stock tips you sell. Late last year and right up until about 5 weeks ago I started seeing a whole load of friends on Instagram, Facebook etc "preaching the word" about Sharesies. That should have been a MASSIVE signal for me to get out. Luckily I had sold a fair bit of my holdings before then ... but I liken it to a modern day version. "When the Instagram influencer is flogging his Sharesies referral code, sell up ASAP!"



Agreed. But all they see is "stocks on sale" (their words, not mine). I actually think there are some oversold bargains in current climate but Air NZ ain't one. Air travel buggered for ages. I went so far as to spend up all my airpoints on mitre 10 vouchers and wine as I'm so sure this is going down further.

I agree with you, what people don't seem to understand is yes they got money from the government, however its a huge loan they will need to pay back - with interest!

[winner69]

Foran:
“Maybe by Christmas we'll be back to a third of the size, maybe in 18 months we're back to three-quarters of our size.“

In other words munted

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12320272

[justakiwi]

Sometimes, in times of stress and uncertainty, some of us make a calculated decision to take a chance and buy an investment related “lotto ticket.” Life is short and the current situation has presented us all with that reality check. But like betting on the long shot outsider at the races - “just in case.”

Some, like my daughter are buying an AIR lotto ticket. Some, like me, went with BliS.

Because YOLO (you only live once) ;)

[winner69]

Where's AIRplanes being parked up?

Emirates have many at Dubai ...this little shows a few of them
https://twitter.com/belowmda/status/1243644198932197376?s=19

[samjaynz]

I agree with you, what people don't seem to understand is yes they got money from the government, however its a huge loan they will need to pay back - with interest!

Paying back a massive loan on hugely reduced earnings doesn't sound like my idea of fun.

I must admit that having gone from flying 2-3 times per week on average (and internationally at least 1-2 times per month) right up until early Feb, I don't actually miss flying that much. I'll be glad to have a break from the scrambled eggs and camp fire beans in the koru lounge for a while. Miss the free choccy fish though.

Maybe travel will go back to more of the "good old days" where ticket prices are higher but it's more of an experience - I feel like budget airlines will have the hardest time rebounding.

[winner69]

Foran:
“Maybe by Christmas we'll be back to a third of the size, maybe in 18 months we're back to three-quarters of our size.“

In other words munted

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12320272

Never again will we see AIR reporting a NPBT of $806m as our Chris with the golden halo once did.

[Hoop]

Foran:
“Maybe by Christmas we'll be back to a third of the size, maybe in 18 months we're back to three-quarters of our size.“

In other words munted

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12320272

'''''
11167

[Beagle]

Foran:
“Maybe by Christmas we'll be back to a third of the size, maybe in 18 months we're back to three-quarters of our size.“

In other words munted

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12320272

$900m just the first tranche of "support". They will need another $900m within a few months. Turnover now being talked about is $500m per annum down from $6,000m per annum, so just 8%. I expect that to come down even further. Cash burn must be about $300m a month from April PLUS all the cash they have to refund to passengers for cancelled flights. Unless there is a massive capital raise I foresee the company being in a negative equity position in late 2020, (in other words more than $2 billion in losses wiping out all existing equity).
Minority shareholders are on a one way trip to.... you know where.

[BWH]

I bailed yesterday at 89c. Made a bit of a loss, but not as much as I could have. I can't see an immediate future in AIR as an investor.

[Beagle]

So much for travel of aircraft being safe...not that I think anyone actually ever believed that... 8 staff of AIR infected with the virus from LA and London route https://www.msn.com/en-nz/news/national/coronavirus-live-covid-19-updates-in-nz-and-around-the-world-on-28-march/ar-BB11O9zw?ocid=spartandhp

[iceman]

So much for travel of aircraft being safe...not that I think anyone actually ever believed that... 8 staff of AIR infected with the virus from LA and London route https://www.msn.com/en-nz/news/national/coronavirus-live-covid-19-updates-in-nz-and-around-the-world-on-28-march/ar-BB11O9zw?ocid=spartandhp

OMG Beagle. I know you've gone short on AIR but isn't this a bit over the top !!!???. 350-380 people have DIED travelling in cars in each of the last 2 years in NZ.

[Beagle]

OMG Beagle. I know you've gone short on AIR but isn't this a bit over the top !!!???. 350-380 people have DIED travelling in cars in each of the last 2 years in NZ.

Not OTT mate. A lot of people on here were stating that aircraft had medical grade air filtration systems and as such they are safe but the truth is people are travelling in a very confined space breathing each others air and its quite obviously not safe. If this was not the case why would out Govt recommend all non essential domestic travel cease forthwith ?, (that was before the lockdown).

[blackcap]

So much for travel of aircraft being safe...not that I think anyone actually ever believed that... 8 staff of AIR infected with the virus from LA and London route https://www.msn.com/en-nz/news/national/coronavirus-live-covid-19-updates-in-nz-and-around-the-world-on-28-march/ar-BB11O9zw?ocid=spartandhp

These 8 infected (such a nasty sounding word isn't it), will probably be in good health and totally fine. In the Netherlands it is now found that 80% of those in IC are overweight. Not many an overweight AIR host or hostess that I have seen. So actually its not that dangerous an occupation :) (unless you happen to be overweight and suffer pre-existing conditions)

I see NZ already has 50 recovered patients and till no no deaths although one person with other conditions is critical.

[kiora]

Ooch.Overweight?
Look out Pacific Islanders then around 50 %
USA 36 %
NZ 30 %
https://worldpopulationreview.com/countries/obesity-rates-by-country/

[IAK]

So much for travel of aircraft being safe...not that I think anyone actually ever believed that... 8 staff of AIR infected with the virus from LA and London route https://www.msn.com/en-nz/news/national/coronavirus-live-covid-19-updates-in-nz-and-around-the-world-on-28-march/ar-BB11O9zw?ocid=spartandhp
Poor blighters, will be even worse if (when) they're made redundant.

[winner69]

International airlines would also be slow in returning capacity into Australia. “I'd be surprised that in the first two or three years out of this that the global airline market is 50 per cent of where it was last year," he says. And he says it will probably never fully recover unless there were structural changes, such as loosening ownership laws to allow for more mergers between airline groups.

https://www.smh.com.au/business/companies/why-aviation-might-never-look-the-same-again-20200326-p54e65.html

[Airw0lf]

Not OTT mate. A lot of people on here were stating that aircraft had medical grade air filtration systems and as such they are safe but the truth is people are travelling in a very confined space breathing each others air and its quite obviously not safe. If this was not the case why would out Govt recommend all non essential domestic travel cease forthwith ?, (that was before the lockdown).

I believe the core reason for domestic travel being banned is to minimise disparate groups of people mixing with each other - it actually doesn't matter whether people are driving between towns or flying, it's just the fact that people are increasing contact with each other and therefore increasing risk of transmission. The government didn't just ban domestic travel by plane, they banned all forms of it.

It's also hard to say how the eight Air NZ crew got infected - it might not have been due to any failing of hygiene systems on aircraft. It could have been from a hotel they stayed at or the taxi ride to/from the airport.

[Beagle]

International airlines would also be slow in returning capacity into Australia. “I'd be surprised that in the first two or three years out of this that the global airline market is 50 per cent of where it was last year," he says. And he says it will probably never fully recover unless there were structural changes, such as loosening ownership laws to allow for more mergers between airline groups.

https://www.smh.com.au/business/companies/why-aviation-might-never-look-the-same-again-20200326-p54e65.html

That's a very grim demand prognosis and he could be right. I would have thought 60-75% of normal demand by 2022, only time will tell.
With virtually no new bookings, Qantas and Virgin have tried to cut costs to preserve their remaining cash by sending home the bulk of the workforce, standing down 20,000 and 8000 workers respectively (or 70 per cent and 90 per cent of their employees). Interesting contrast to AIR's approach of up to a third of the workforce.
AIR not being realistic or just happy to rely on the Govt who they know won't let them fail...

[dreamcatcher]

My pennies worth airline capacity will be around 30% - 50% with pricing 60% - 100% higher..........NO payee No flyee

Cheap fares will be a thing of the past and not just airlines but every business will try to recover months of lost revenue .........

[777]

Not OTT mate. A lot of people on here were stating that aircraft had medical grade air filtration systems and as such they are safe but the truth is people are travelling in a very confined space breathing each others air and its quite obviously not safe. If this was not the case why would out Govt recommend all non essential domestic travel cease forthwith ?, (that was before the lockdown).

But the virus is reported as not being airborne therefore no air conditioning system matters.

The repetition in all your posts rubbishing AIR makes one think your wife has run off with an AIR employee. You are have become totally boring.

[iceman]

I believe the core reason for domestic travel being banned is to minimise disparate groups of people mixing with each other - it actually doesn't matter whether people are driving between towns or flying, it's just the fact that people are increasing contact with each other and therefore increasing risk of transmission. The government didn't just ban domestic travel by plane, they banned all forms of it.

It's also hard to say how the eight Air NZ crew got infected - it might not have been due to any failing of hygiene systems on aircraft. It could have been from a hotel they stayed at or the taxi ride to/from the airport.

There are suggestions that up to 50 infected people are arriving into the country daily and they are not forced into quarantine. This is shocking while the population is told to stay in lockdown. Or as is pointed out in this article https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12320580 it is like the Government is "trying to empty the bathtub with a jug while the tap is still running "

[blackcap]

There are suggestions that up to 50 infected people are arriving into the country daily and they are not forced into quarantine. This is shocking while the population is told to stay in lockdown. "

I don't subscribe to that rag, however surely once they have arrived, they are also subject to lockdown and staying within their own bubble? Or is the article suggesting they are free to roam and infect? Because lockdown pretty much is quarantine right? Or what am I missing?

[iceman]

I don't subscribe to that rag, however surely once they have arrived, they are also subject to lockdown and staying within their own bubble? Or is the article suggesting they are free to roam and infect? Because lockdown pretty much is quarantine right? Or what am I missing?

Firstly this has been going on for ages. They haven't even be doing simple stuff like checking temperatures or other symptoms of arrivals but started early doing so for departures to the pacific islands. Go figure.
Lockdown relies on people following rules and as we've already seen in NZ, many people simply ignore it. Compulsory quarantine should be enforced.

[mondograss]

There are suggestions that up to 50 infected people are arriving into the country daily and they are not forced into quarantine. This is shocking while the population is told to stay in lockdown. Or as is pointed out in this article https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12320580 it is like the Government is "trying to empty the bathtub with a jug while the tap is still running "

HDPA is pretty notorious for getting the wrong end of the stick. I wouldn’t take too much notice of what she says. If inbound Kiwis are willing to go home and self isolate under the lockdown I don’t see the point in forcing them into a costly, isolated quarantine to achieve the same effect.

[Arthur]

The point of quarantine is that they hopefully not infect other people in their bubble at home or at the supermarket when they shop. Earlier would have been better, but may not of been possible with the volume. God help us if even 10% of those that buggered off to Australia come back and start bludging in the country they have not been paying taxes to.

[iceman]

HDPA is pretty notorious for getting the wrong end of the stick. I wouldn’t take too much notice of what she says. If inbound Kiwis are willing to go home and self isolate under the lockdown I don’t see the point in forcing them into a costly, isolated quarantine to achieve the same effect.

It is a difficult issue but I sort of agree with Dr David Skegg who thinks we are "trying to empty the bathtub with a jug while the tap is still running". We've probably strayed a little too far from this thread but sort of lead on from Beagle's mention of AIR staff being diagnosed with COVID-19.!!

[winner69]

@CamWallace_NZ
On average, in normal circumstances @FlyAirNZ has around 48,000 passengers per day across the network. Yesterday we carried around 670 pax. These dire numbers reflect favourably and show that kiwis are respecting the essential travel advice. @andykirton

[Beagle]

Just 1.4% of normal pax. Wow !

[samjaynz]

Just 1.4% of normal pax. Wow !

Might get some space for once!

[Beagle]

https://www.msn.com/en-nz/money/news/covid-19-airline-crew-very-anxious-worried-as-redundancies-loom/ar-BB11HOUy?ocid=spartandhp

[peat]

Beagle , you suspected Foran was capable of making some hard calls. This is one. Borderline legality according to the article. I somehow doubt it will do much good contesting it, but you never know. AIR will have some litigious staff no doubt and they might give it a go. I dont know if the law has any force majeure type of exclusion, probably not. Maybe hes just buying time but he's using their money. People dont like being told when to take leave especially under ominous circumstances coz it aint no holiday.

[winner69]

Airlines cheap as

I hear beagle uses Zoom to do consultations with his clients


@samfr
Zoom is now valued at 50% more than all the US airlines put together.

[Beagle]

Beagle , you suspected Foran was capable of making some hard calls. This is one. Borderline legality according to the article. I somehow doubt it will do much good contesting it, but you never know. AIR will have some litigious staff no doubt and they might give it a go. I dont know if the law has any force majeure type of exclusion, probably not. Maybe hes just buying time but he's using their money. People dont like being told when to take leave especially under ominous circumstances coz it aint no holiday.

AIR staff have to realistic and realise they don't live in some alternative nirvana universe bubble where they're immune from market forces just because they're majority Govt owned. Just 1.4% normal pax loads and retaining 70% of staff....talk about being on a collision course with reality ! QAN are retaining just 30% of their staff on pay, Virgin only 10%, the rest are using up leave whether they like it or not or on unpaid leave. I think AIR's 70% retention looks commercially untenable if all Foran is expecting is 30% normal pax loads by Christmas.

Page 67 of the annual report is actually quite illuminating. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AIR/339567/305893.pdf
There's actually a heck of LOT more Aircrew and engineering staff on >$300K than management. They need to right size the business sooner rather than later if they want to get though this with any equity left.

Foran's own pay cut of 15% and nobody else in the senior leadership team taking one at all looks well and truly out of line with what other industry participants are doing and could be indicative of a company taking a commercially unrealistic view of the seriousness of the situation.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12320903 Page 67 of the annual report shows there are 65 fats cats earning $500K+. These are the people that have done incredibly well out of the airline over the years and need to now lead by example by all taking 50% pay cuts, not a pathetic 15% for just one of them, that's not leadership, that's just tokenism by one very wealthy man, as it currently stands.

QAN measures taken proactively nearly 3 weeks ago, detailed here under cost reduction measures on page 2 put AIR's cost reduction program to shame.
https://www.asx.com.au/asxpdf/20200310/pdf/44fwgd46nx86ch.pdf

[samjaynz]

Just got one of those mass email outs from Mr Foran, outlining the impact Covid-19 has had on revenue and the effect on staffing.

I have some friends who work for Air NZ (junior levels) and feel very sorry for them indeed.

[Cyclical]

Starting to get a bit more realistic...

"Air New Zealand boss says airline will be mainly domestic"

https://www.tvnz.co.nz/one-news/new-zealand/air-new-zealand-boss-says-airline-mainly-domestic-looks-lay-off-over-3000-staff

I guess mass layoffs isn't something companies have had to do for quite some time, and no one wants to be the first.

[carrom74]

Different markets, different product positioning -but the pain is mutual amongst airlines...
https://www.bbc.com/news/business-52084003

[peat]

Just got one of those mass email outs from Mr Foran, outlining the impact Covid-19 has had on revenue and the effect on staffing.

I have some friends who work for Air NZ (junior levels) and feel very sorry for them indeed.

that email was so brutally factual , I was kind of stunned that was sent out to all customers!

[Cyclical]

that email was so brutally factual , I was kind of stunned that was sent out to all customers!

Pretty hard to sugar coat it. I was half expecting a line in there like "oh, and by the way, we've cancelled your airpoints." Maybe that's the next email...

[dobby41]

Pretty hard to sugar coat it. I was half expecting a line in there like "oh, and by the way, we've cancelled your airpoints." Maybe that's the next email...

Though if they mainly fly domestically it's going to be hard for me to use my $2k apripoints and probably $10k flight credits.

[samjaynz]

that email was so brutally factual , I was kind of stunned that was sent out to all customers!

Yep definitely one of the most "raw" emails I've had throughout this crisis thus far.

[winner69]

Just read Air NZ described as a ‘zombie airline flying on fumes.’ ...that seems appropriate

Will be OK when renamed National Airways Corporation

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12321018

[stoploss]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12321018

Beagle can you help me make the numbers work ? , $ 500 mio revenue , labour cost $110 Mio a month , lets say that is reduced to $ 75 mio ( just over 30 % reduction ) lease payments etc etc
Disc : short