AIR - Air NZ.

[winner69]

Dont want to bring out the "Dont invest in airlines piece" but I think thats behind the 10 PE currently.

Roger been sort of nagging me to buy into AIR knowing I don't invest in airlines

I'm have that feeling that if I changed my mind (and Roger puts up a compelling case to do so) and bought into AIR the new Dreamliner would crash and hundreds of people would die (with a disasterous impact on the shareprice). I couldn't live with that so no AIR or any airlines for me.

[Beagle]

Dont want to bring out the "Dont invest in airlines piece" but I think thats behind the 10 PE currently.

But if they grow underlying after tax earnings by 30% again this year then the stock goes from a trailing underlying PE of 9.28 to a forward PE of 7.13, (203.5 / 28.52 cps)...or we could see a bit of PE expansion as the market becomes comfortable AIR can execute its significant medium term capacity expansion successfully and we could see $3.00 a share and still be on a modest PE of 10.5 :)

[Beagle]

Roger been sort of nagging me to buy into AIR knowing I don't invest in airlines

I'm have that feeling that if I changed my mind (and Roger puts up a compelling case to do so) and bought into AIR the new Dreamliner would crash and hundreds of people would die (with a disasterous impact on the shareprice). I couldn't live with that so no AIR or any airlines for me.

LOL Your loss mate, you haven't got Wall Steer with Gordon Gekko 's airlines advice playing on a continuous loop have you :). I'll be enjoying a few drinks in CHCH after the AGM and spending some of my multi thousand dollar divvy payment and spare a thought for poor risk averse investors, your good self included or you could come along to the CHCH sharetrader meeting after the AGM and I'll buy you a beer :) Here's a thought for the day. ALL companies face serious commercial risk.

[Schrodinger]

Umm Roger you need to factor in a high risk premium for the industry they are in.... I would expect high returns when conditions are in their favour. Being a longer term investor I want to know this company will be around in the long run. What is in favour of AIR is the NZ govt (taxpayers) who will bail out this airline anytime it gets it wrong. Still this doesnt answer the capital gain piece and can AIR turn $330M into $500M+ compounding over the next ten years. Other considerations include the relativer closed domestic market which will limit growth and a resurgent Qantas (will happen). Looking at the recent numbers the international piece is underperforming and there is growth there but is growth capped at a certain capacity. I know this is not like retailing, but a new retail chain can add hundrerds of stores which multiplies scaling-AIR will need to rely on extra services to a limited domestic market. Thats the modelling you should be looking at if you are thinking of investing.

Where I think their industry is currently at a cross roads is the new planes and when the market turns do the new planes enable airlines to stop going out of business? This is very important for larger passenger markets and if the airlines move from being bankruptcy prone to weathering downturns like other industries then this sector could be viewed differently. Havent researched enough to run the numbers on these scenarios.

[winner69]

LOL Your loss mate, you haven't got Wall Steer with Gordon Gekko 's airlines advice playing on a continuous loop have you :). I'll be enjoying a few drinks in CHCH after the AGM and spending some of my multi thousand dollar divvy payment and spare a thought for poor risk averse investors, your good self included or you could come along to the CHCH sharetrader meeting after the AGM and I'll buy you a beer :) Here's a thought for the day. ALL companies face serious commercial risk.

I could manage and live with the risk losing cash....it's just the hundreds of dead I couldn't live with

Just don't want to tempt fate. My experience over many years when I have these premonitions it generally happens

[Beagle]

Risk is already factored into the low PE which is even lower than notoriously cyclical PGW. Very comfortable for the medium term :)

[Marilyn Munroe]

ALWAYS looking for a negative, never seems to be a balanced or objective comment... seriously why do you bother contributing ?
Is it so hard to have a positive word for the work the directors and staff have done...

OK here is something positive. I flew over the ditch recently with Cullen Airlines. Managed to score an emergency exit row which meant more leg room than is usual in thrombosis class and as a bonus the middle seat was empty.

The aircraft was was modern, the staff pleasant, and the seat back entertainment screen is a nice feature.

While I am handing out bouquets in tourism and travel I found the staff at Queensland Rail pleasant and helpful. Goodonya.

Boop boop de do
Marilyn

[Beagle]

OK here is something positive. I flew over the ditch recently with Cullen Airlines. Managed to score an emergency exit row which meant more leg room than is usual in thrombosis class and as a bonus the middle seat was empty.

The aircraft was was modern, the staff pleasant, and the seat back entertainment screen is a nice feature.

While I am handing out bouquets in tourism and travel I found the staff at Queensland Rail pleasant and helpful. Goodonya.

Boop boop de do
Marilyn

Now you can take two Panadol, a glass of wine and go and have a lie down as I can tell that comment hurt you as it came out :)

[Arbroath]

I'm very happy I bought shortly after the Govt sell down at $1.69. Have always been risk averse with airlines for the reasons Winner mentions. No airline is really immune from what has happened to Malaysian Airlines but with Air NZ they do have an almost monopoly domestic position and the economics of ordering new fuel efficient planes ahead of competitors is a virtuous circle from a competitive perspective.

Already had a 4.5c dividend and another 15.5c coming shortly. Agree with Roger the low PE factors in the risks more than adequately. If they deliver more growth in the next 12 months then $2.80-$3 is realistic. Do agree Qantas will be stronger again at some point in the next few years so I'd more likely be a seller near $3 than buying more.

[Beagle]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11315188

Air New Zealand Flying High

http://www.nzherald.co.nz/technology/news/article.cfm?c_id=5&objectid=11314650

747 - Is it's number up ? Well worth a look at this nostalgic reflection upon the queen of the skies.

FINALLY - a couple of articles from the herald that are actually worth reading although I would hasten to add that I don't agree with regional fare comments. According to AIR regional airfares have only moved 1% over the last five years and the company has faced substaintial increases in fuel, landing fees and other fees. If regional was so profitable how come Jetstar don't expand their network...

Worth noting that the N.Z. Govt have received just over $90m in tax payments in the last year and by the time the final divvy and special are paid by my calculations they will have received $117.9m in dividend payments from their 53% stake, that's more than $200m going into their coffers.

Also staff are all getting a $750 bonus, (notwithstanding that some senior pilots are exceptionally well paid already).

[slimwin]

Jetstar would have to buy a new fleet type for these routes. Origin tried to compete but air nz just lowered their fares until they went bust. There is a lot of disquiet about our regional fares. You can fly from chch to akl for around 200 some times and 300 from Nelson to wlg.
8500 staff got a 750 dollar bonus. We like CL now:-)

[Beagle]

You're not allowed to spend it on drinks if you're going on duty in Honolulu :) I like CL too :D

PS Nobody talks about increased costs AIR faces from the likes of Airways navigational charges http://www.airways.co.nz/about_Airways/media_releases/2014_Annual_Report_Results.asp who are doing very well for themselves and that's before we even start talking about Infratil's approach with landing charges at for instance Wellington which some in the industry consider to be egregious and still have to be paid regardless of whether there's one person or a full load from a short flight from say Nelson.

[Marilyn Munroe]

Crikey! Queer and Nasty Airlines has just reported a statutory loss of $A2.8 billion.

Boop boop de do
Marilyn

[winner69]

Talking of 747s I always thought I was special with my frequent flyer number ending in 747

[Zaphod]

Jetstar would have to buy a new fleet type for these routes. Origin tried to compete but air nz just lowered their fares until they went bust. There is a lot of disquiet about our regional fares. You can fly from chch to akl for around 200 some times and 300 from Nelson to wlg.
8500 staff got a 750 dollar bonus. We like CL now:-)

My understanding is that one of the largest factors in the collapse of Origin was the loss of the codeshare agreement with Qantas (or was it Jetconnect?) sometime in the early 2000's, resulting in quite a drop is PAX. When Qantas entered the domestic market alongside AirNZ and Origin, competitive pricing pressures (as you point out) were the final nail in the coffin.

[tzbang]

Excuse my newbieness, this could be a real dumb question but I've never had a divy before. Is there any minimum holding period or anything before one qualifies for a divy? Or does simply holding the shares automatically entitle you?

Also, I would assume there any many holders who will wait for the divy and before selling afterwards which will bring SP downwards?

[777]

This is from the announcement

Details of Final and Special Dividends
* Record Date for Final and Special Dividends: 12 September 2014
* Payment Date for Final and Special Dividends: 22 September 2014


That means as long as you hold the shares on record date you are entitled to the dividend.

[tzbang]

So.. doesn't that mean people can buy in just prior, get the divy and then sell? Causing a quick spike & fall in SP?

[noodles]

So.. doesn't that mean people can buy in just prior, get the divy and then sell? Causing a quick spike & fall in SP?
Yes, the share price usually drops by the amount of the dividend.

[winner69]

Yes, the share price usually drops by the amount of the dividend.

Google 'dividend stripping' and see why some punters think such strategies are profitable

Essentially quite often the shareprice quickly reverts to the price it was prior to the dividend date

[Beagle]

http://www.sharechat.co.nz/article/3aa2e2f7/jetstar-loses-ground-in-nz-as-qantas-plunges-to-a-2-84-bln-loss.html?utm_medium=email&utm_campaign=Jetstar+loses+ground+in+NZ+as+Qantas+ plunges+to+A284+bln+loss&utm_content=Jetstar+loses+ground+in+NZ+as+Qantas+p lunges+to+A284+bln+loss+CID_ca4b564f08eb090a173642 30b2cdf21b&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle3aa2e2f7jetsta r-loses-ground-in-nz-as-qantas-plunges-to-a-2-84-bln-losshtml

Jetstar loses ground in New Zealand.

I also had a quick look at the Qantas horror result and noticed contained therein a mention that there was to be no new routes for Jetstar for the forseeable future or words to that effect...

PS Three other things to know about dividend stripping. Based on a study I've seen approximately 80% of companies share prices regain the initial SP dividend drop within 3 weeks and secondly anyone on an income tax bracket below $48,000 (i.e. tax rate of 17.5%) will normally get a meaningful advantage conferred upon them with fully imputed dividends having imputation credits attached at the company tax rate of 28% and finally the bigger the dividend as a percentage of the stock price, (in this case a whopper at 7%), the more likelihood of dividend stripping being a successful trading strategy :)

[tzbang]

Weird.. according to Wikipedia, 'Dividend stripping is the purchase of shares just before a dividend is paid, and the sale of those shares after that payment'

Surely it makes more sense, to snap out shares the day AFTER a divy assuming the SP falls, and selling when it's returned to pre-div levels (assuming it's a quality company).

[Hoop]

So.. doesn't that mean people can buy in just prior, get the divy and then sell? Causing a quick spike & fall in SP?

If your'e thinking about Div stripping or just buying ahead of the dividend and leaving everything until the last moment ...remember buying shares takes 3 days to transact...the ex date (12th Sept) is the registry date

[tzbang]

yeah so, buy the day after the divy when it's fallen.. takes 3 days... by then it's probably returned to pre-div levels and sell? Seems too easy.

[Beagle]

Weird.. according to Wikipedia, 'Dividend stripping is the purchase of shares just before a dividend is paid, and the sale of those shares after that payment'

Surely it makes more sense, to snap out shares the day AFTER a divy assuming the SP falls, and selling when it's returned to pre-div levels (assuming it's a quality company).

Either practice can be equally effective. If the record date is the 12th, this should mean they trade ex divvy on the 10th Sept so those looking to play this game will need to ante-up soon if they haven't already :)

[777]

Not all shares have the same behaviour. Then you have to remember that by regularly doing this you may become a trader which has tax implications. Another subject all together.

[Beagle]

yeah so, buy the day after the divy when it's fallen.. takes 3 days... by then it's probably returned to pre-div levels and sell? Seems too easy.

Takes 3-4 weeks on average to recover the divvy and yes, it is easy but with some caveats. Some for example would claim the SP is already starting to build the forthcoming divvy into itself, (dividend hounds chasing a strong divvy)...others, myself included would say it was a very strong result and furthermore the outlook for 2015 is also good so the increase in price yesterday and today has nothing to do with the forthcoming divvy and there's still a free lunch on the table :)

[couta1]

yeah so, buy the day after the divy when it's fallen.. takes 3 days... by then it's probably returned to pre-div levels and sell? Seems too easy.
You can't guarantee that the share price will drop by the same amount as the dividend and if it does it may only remain that way for a short time, from memory the studies done show an average drop of 77% across a broad range of stocks immediately going ex divvy and given Air Nz strong result the rebound may occur in a shorter time frame than normal. As 777 said not all shares behave the same, one example was TEL last year when the price didn't drop at all going ex divvy and in fact started climbing soon after, some people believe buying ex divvy gives them a better return if they intend to hold as they save the tax they would have paid on the divvy assuming as mentioned above the share price sheds the full divvy,food for thought anyway.

[Okebw]

one example was TEL last year when the price didn't drop at all going ex divvy and in fact started climbing soon after, some people believe buying ex divvy gives them a better return if they intend to hold as they save the tax they would have paid on the divvy assuming as mentioned above the share price sheds the full divvy,food for thought anyway.

I recall meridian behaving similarly earlier this year. Rising by the amount of the dividend following the ex date

[noodles]

some people believe buying ex divvy gives them a better return if they intend to hold as they save the tax they would have paid on the divvy assuming as mentioned above the share price sheds the full divvy,food for thought anyway.
The dividend is fully imputated so that argument does not apply here.

[noodles]

http://www.sharechat.co.nz/article/3aa2e2f7/jetstar-loses-ground-in-nz-as-qantas-plunges-to-a-2-84-bln-loss.html?utm_medium=email&utm_campaign=Jetstar+loses+ground+in+NZ+as+Qantas+ plunges+to+A284+bln+loss&utm_content=Jetstar+loses+ground+in+NZ+as+Qantas+p lunges+to+A284+bln+loss+CID_ca4b564f08eb090a173642 30b2cdf21b&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle3aa2e2f7jetsta r-loses-ground-in-nz-as-qantas-plunges-to-a-2-84-bln-losshtml

Jetstar loses ground in New Zealand.

I also had a quick look at the Qantas horror result and noticed contained therein a mention that there was to be no new routes for Jetstar for the forseeable future or words to that effect...

PS Three other things to know about dividend stripping. Based on a study I've seen approximately 80% of companies share prices regain the initial SP dividend drop within 3 weeks and secondly anyone on an income tax bracket below $48,000 (i.e. tax rate of 17.5%) will normally get a meaningful advantage conferred upon them with fully imputed dividends having imputation credits attached at the company tax rate of 28% and finally the bigger the dividend as a percentage of the stock price, (in this case a whopper at 7%), the more likelihood of dividend stripping being a successful trading strategy :)
I wish it were with PGW, but so far not the case.

[Hoop]

yeah so, buy the day after the divy when it's fallen.. takes 3 days... by then it's probably returned to pre-div levels and sell? Seems too easy.

Hi Tzbang....yep easy when there is a bull market running..this is when all us posters on ST are financial genius's...It's when the tide turns we find out who the real genius's are...
AIR's bull market cycless don't last as long as other stocks...AIR is a very cyclic stock...This +300% AIR bull is 2 years old now, a year longer than the 2006/2007 300% Bull.

[couta1]

The dividend is fully imputated so that argument does not apply here.
It does for all those on the top tax rate the imputation doesn't save you anything at the end of the day other than giving you more money in your pocket until you square up your end of year tax return at which time you still have to account for the difference between the RWT and the 33% you need to pay, claiming the imputations against the tax payable on your taxable income accounts for the difference.

[noodles]

It does for all those on the top tax rate the imputation doesn't save you anything at the end of the day other than giving you more money in your pocket until you square up your end of year tax return at which time you still have to account for the difference between the RWT and the 33% you need to pay.
Maybe we have a different understanding of how imputation credits work. Sure there is a difference between the 28%(company) and 33%(top personal). However, I'm sure you would agree that having imputation credits is better than not having them?

[couta1]

Maybe we have a different understanding of how imputation credits work. Sure there is a difference between the 28%(company) and 33%(top personal). However, I'm sure you would agree that haveingimputation credits is better than not having them?
Agreed it is better having them especially if they come with a PIE investment as those on the top tax rate don't have to include them in their tax return saving 5% tax however for those on the top rate buying ex divvy can be a good strategy.

[dingoNZ]

Maybe we have a different understanding of how imputation credits work. Sure there is a difference between the 28%(company) and 33%(top personal). However, I'm sure you would agree that haveingimputation credits is better than not having them?

This man speaks the truth - its effectively them paying the tax burden on your behalf. By the means of passing already paid tax income tax from the company) onto the recipient. Just means the end recipient doesn't end up being 'double dipped' by the IRD

[Beagle]

I wish it were with PGW, but so far not the case.
There's always an exception to general market behaviour. The jury is still out on this case and I hold. What we saw in that case was an annual result that was only very slightly ahead of recent guidance together with the announcement of a final and special divvy that appeared to surprise the market, (myself included). We then witnessed a near vertical move in the SP in a very short space of time by the amount of the dividend and a cent or two more, followed by a drop of the full dividend and a cent or so more immediately after it went ex divvy and still hasn't recovered. The SP behaviour suggests dividend hounds chased the stock up to strip it and the 28% imputation credits attached, suggesting a number of shareholders or dividend hounds are on a 17.5% tax rate perhaps ?

[noodles]

The SP behaviour suggests dividend hounds chased the stock up to strip it and the 28% imputation credits attached, suggesting a number of shareholders or dividend hounds are on a 17.5% tax rate perhaps ?
My theory is that there is a negative sentiment in the stock because of low diary prices. I won't talk any more because it has been thrashed out on the PGW thread.

But it is an interesting case study because the magnitude of the dividend of AIR and PGW are similar. We shall see with AIR.

I own both PGW and AIR. I don't plan to strip the dividend.

[Beagle]

It certainly is an interesting and in my view a very relevant case study as its rare that you get two cyclical companies to compare, both of whom are paying final and special divvy's that amount to circa 7-8% of their SP. Like you, I own both and see both as a good medium term hold.

[Zaphod]

VAH have sold a 35% stake in their Velocity FFP to Affinity Equity Partners.

http://www.asx.com.au/asxpdf/20140829/pdf/42rvfffwptmkvl.pdf

The consensus from previous discussions appears to be that AirNZ was unlikely to sell Airports to a private partner outright, especially given that they are already flush with cash, but perhaps a similar arrangement could benefit the AirNZ from a strategic perspective?

[winner69]

Just as well AIR not equity accounting Virgins profit this year

[mikeybycrikey]

VAH have sold a 35% stake in their Velocity FFP to Affinity Equity Partners.

Hmmm, that's interesting. I guess FlyBuys isn't owned by the companies that run use it so why should an airline FF program have to be?

Personally, I think that selling a FF program is a bad idea. It's a core part of the marketing of the airline and if the FF program does something that customers don't like, it's the high-value customers that it is going to annoy the most. Admittedly this is only a minority stake but it still strikes me getting a short-term gain in exchange for long-term pain.

[Beagle]

Just as well AIR not equity accounting Virgins profit this year

Short term pain for 2015 for long term gain ?
AIR took restructuring costs of $45m related to redundancy and fleet transitional costs in the financial just released which is non-recurring so while I guess its fair to say there could be some pain next year from their 25.99% stake in VAH I think from a strategic route expansion perspective AIR's directors clearly see the value, especially in the long term. At a rough guess one matter might replace the other next year so no impact on 2015 normalised profit.. Have I mentioned shareholders are "well positioned" ? :)

[winner69]

I would say Virgin better positioned than Qantas in Australia as well

Best one to choose as a partner

[Zaphod]

Hmmm, that's interesting. I guess FlyBuys isn't owned by the companies that run use it so why should an airline FF program have to be?

Personally, I think that selling a FF program is a bad idea. It's a core part of the marketing of the airline and if the FF program does something that customers don't like, it's the high-value customers that it is going to annoy the most. Admittedly this is only a minority stake but it still strikes me getting a short-term gain in exchange for long-term pain.

AC floated around 15% of their Aeroplan FFP in the early 2000's and then later sold their final stake several years later. Floating and then later selling FFP did provide them with a financial windfall and the new company is completely focused on becoming a leading consumer loyalty programme, and has all of the traits (e.g. Points accumulation via Credit cards, Supermarkets, etc.) of AirNZ's FFP.

I personally don't see any justification for AirNZ selling theirs at the moment, but perhaps in the long term it could provide a cash windfall for shareholders while also ensuring that the FFP gets the laser focus on customer acquisition that it might other not have.

It would however be nice to see a more detailed breakdown in the financial reports of the impact that the loyalty programme is having on revenue.

[winner69]

Makes a $300 or whatever air new zealand fare cheap ....unless flying to whangarei

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11317261

[Beagle]

Thanks for the link. Reading that was like stepping back decades in time for me to an era when I had little money and no other option but to take the absolute cheapest transport possible. Now days you couldn't pay me $300 to endure an overnight bus trip Wellington to Auckland assuming it went according to plan. As for running out of fuel half way through the trip as mentioned later in that story, where do they find these people to drive these old buses ? Calcutta perhaps...who exactly are you entrusting your life too ???? The Herald's attempt to compare various modes of transport last week was another piece of pathetic journalism...what possible relevance has the cost of a trip on the cheapest cut price bus operator using Mickey Mouse drivers, (a service which takes many hours at best) got with the speed and efficiency of air travel ?

If they want to keep up their attack crusade against AIR you would have thought the least they could have done was to spend some time comparing regional airfares for similar distance trips at the same times in Australia. Don't these so called journalists have any idea of what is a relevant comparison for goodness sake. Another epic fail at any sort of intelligent journalism. Just as well the online edition is free because it sure isn't worth the paper its printed on for the print version LOL.

[winner69]

Roger, Ever get that overnight train between akl and Wgtn in the good old days. It was called the Limited or something like that

Even had sleeping compartments and you could get off at Frankton and Taihape to get a pie and cuppa

Seems punters were better served in the old days

Only the very rich dudes flew those days

[percy]

Roger, Ever get that overnight train between akl and Wgtn in the good old days. It was called the Limited or something like that

Even had sleeping compartments and you could get off at Frankton and Taihape to get a pie and cuppa

Seems punters were better served in the old days

Only the very rich dudes flew those days

Did the cups have handles?

[winner69]

Did the cups have handles?

Of course Percy. The real McCoy they were

In the 60/70's the best way to get to Chch was the overnight ferry from wgtn. Fond memories of the Maori / Rangitira going down for Cup week. They woke you up with a cuppa when it sailed into Lyttelton forst thing in the morning.

Even back then AIR was price gouging as well ... ha ha

[winner69]

Cups back then better than the poly ones you get on the planes now .... but then there were heaps of people employed to wash them.

Is the world a better place?

[Xerof]

You beat me to it with the image Quickdraw Mcgraw w69. I remember as a kid going overnight on the Limited, watching grown adults chuck them out the windows.......

used to do the ferry as well winner, on the Rangitira, the Maori, and the Wahine (but not the last voyage)

[winner69]

You beat me to it with the image Quickdraw Mcgraw w69. I remember as a kid going overnight on the Limited, watching grown adults chuck them out the windows.......

used to do the ferry as well winner, on the Rangitira, the Maori, and the Wahine (but not the last voyage)

Just for you - the Maori

Those were the days .... hours in the bar ..... find your berth .... a few hours kip .... steward and a cuppa in the money ....off the boat and on to a train and in middle of Chch by 9am

[winner69]

Took the Overlander from Palmy to Auckland many years ago. Very relaxing and got to see more of the country than I ever would have driving/flying. I keep telling Kiwis to take it when they say the want to go to Canada see the mountains/forests. Ummmm, it's right in your own backyard guys!!!

But Vancouver to Jasper is something special though isn't it Moosie

[winner69]

No idea. I'm an East Coast boy!

I loved Halifax when I ended up there for a couple of days years ago.

Great spots around Nova Scotia

I take a guess and say you from Montreal

[Beagle]

W69 I remember the overnight train Akl to Wellington, as a family we could only afford regular seats and I remember how painful it was to try and get any sleep, any you managed to get was always accompanied by a very painful neck, then spending the day in Wellington and then overnight to Lyttleton on the ship.
It was quite the journey and I remember how sick I got on the boat.
This morning AIR had grabaseat specials to CHCH for $45 and you're there in 1 hour 20 minutes. Quite the contrast don't you think.

[winner69]

W69 I remember the overnight train Akl to Wellington, as a family we could only afford regular seats and I remember how painful it was to try and get any sleep, any you managed to get was always accompanied by a very painful neck, then spending the day in Wellington and then overnight to Lyttleton on the ship.
It was quite the journey and I remember how sick I got on the boat.
This morning AIR had grabaseat specials to CHCH for $45 and you're there in 1 hour 20 minutes. Quite the contrast don't you think.

Yes a different world but what an experience it was in those days

To get to the AIR meeting $89 down .... would have to stay for the sharetrader meeting as cant afford the expensive late afternoon Koru Hour flights home .... and stay the night either in the overseas terminal (open 24 hours I believe) or with percy ... and get a $69 mid morning home

[Beagle]

Yes a different world but what an experience it was in those days

To get to the AIR meeting $89 down .... would have to stay for the sharetrader meeting as cant afford the expensive late afternoon Koru Hour flights home .... and stay the night either in the overseas terminal (open 24 hours I believe) or with percy ... and get a $69 mid morning home

Yes it certainly was quite "the" experience.
Sssshhh keep it between us but Forest and I are catching the last flight home on Jetstar at 20.50 because it gave us more drinking time after the AIR AGM. I couldn't possibly comment on which airline we're flying down on and absolutely refute that price had anything to do with it LOL. Be great if you can come along :)

[forest]

Yes it certainly was quite "the" experience.
Sssshhh keep it between us but Forest and I are catching the last flight home on Jetstar at 20.50 because it gave us more drinking time after the AIR AGM. I couldn't possibly comment on which airline we're flying down on and absolutely refute that price had anything to do with it LOL. Be great if you can come along :)


it is not AIR

[Beagle]

$2.17 ($2.015 ex divvy) is great buying with management clearly confident of further growth in the years ahead. The latent hungry beagle hound that lurks within is very happy with the XXXXL forthcoming divvy feed hence I decided to buy more and order off the upsized dividend menu :D

[winner69]

Your mate chris was on the radio this morning saying that these new jets coming soon can carry heaps more cargo as well.

Relatively small in the big picture but good eh

[Beagle]

Your mate chris was on the radio this morning saying that these new jets coming soon can carry heaps more cargo as well.

Relatively small in the big picture but good eh

Sure is, another 10 tonnes I believe.


Sorry, not following this thread, but when is the record date for this stock?

I believe they trade ex divvy on the 10th Sept.

[winner69]

Sure is, another 10 tonnes I believe.



I believe they trade ex divvy on the 10th Sept.

15 tonnes on a Dreamliner. That's a lot of salmon and roses and strawberrys

http://www.radionz.co.nz/national/programmes/businessnews/audio/20148163/air-nz-expects-its-new-planes-will-improve-its-cargo-results

[tzbang]

$2.17 ($2.015 ex divvy) is great buying with management clearly confident of further growth in the years ahead. The latent hungry beagle hound that lurks within is very happy with the XXXXL forthcoming divvy feed hence I decided to buy more and order off the upsized dividend menu :D

It *does* seem to be good buying.. I'm a bit surprised not more people are snapping for shares prior to the divvy. Still a lot of nervousness in airline investments perhaps?

[777]

Sorry, not following this thread, but when is the record date for this stock?

NZX has this info as does the the company's website.

[Beagle]

Are there any special conditions around being eligible for the special divvy??

No - all are welcome to participate.

[Beagle]

15 tonnes on a Dreamliner. That's a lot of salmon and roses and strawberrys

http://www.radionz.co.nz/national/programmes/businessnews/audio/20148163/air-nz-expects-its-new-planes-will-improve-its-cargo-results

Many thanks for that. Real game changers these new Dreamliner's :)

[skid]

Thanks for the link. Reading that was like stepping back decades in time for me to an era when I had little money and no other option but to take the absolute cheapest transport possible. Now days you couldn't pay me $300 to endure an overnight bus trip Wellington to Auckland assuming it went according to plan. As for running out of fuel half way through the trip as mentioned later in that story, where do they find these people to drive these old buses ? Calcutta perhaps...who exactly are you entrusting your life too ???? The Herald's attempt to compare various modes of transport last week was another piece of pathetic journalism...what possible relevance has the cost of a trip on the cheapest cut price bus operator using Mickey Mouse drivers, (a service which takes many hours at best) got with the speed and efficiency of air travel ?

If they want to keep up their attack crusade against AIR you would have thought the least they could have done was to spend some time comparing regional airfares for similar distance trips at the same times in Australia. Don't these so called journalists have any idea of what is a relevant comparison for goodness sake. Another epic fail at any sort of intelligent journalism. Just as well the online edition is free because it sure isn't worth the paper its printed on for the print version LOL.

Roger-
That flight we took from Auckland -Vancouver with AIR was a bit like that overnight bus trip you mention--It was not a case of spending a bit more for comfort--Now that may all change with the dreamliners but I just flew with Thai and as I mentioned before -it was a different beast as far as comfort and service.(both flights were economy)
There is alot involved in investing in an airline--but if that was major factor -I would certainly think twice

Imo you cant cram that many seats in an aircraft and then get away with claiming you are a top class airline

[Beagle]

Hi Skid,

I understand where you're coming from, especially since I'm a big bloke but the vast majority of the world's airlines are moving to a pitch of about 32 inches in economy if they aren't there already. They're really caught between a rock and a hard place. As far back as I can remember, (I'm coming up 53), if you waited for a good special you could fly to London return for just on $2,000 plus taxes. Decades later the sale price is the same or very similar despite a massive increase in costs and this is what the general public wants. How many other products or services can you name that are the same nominal price as 25 or 30 years ago despite the effects of inflation over all those years ? I can't think of any !!!!!
Can't remember if you're experience was on a 777-300 or the older 200 series but I believe AIR are spending about $100m refurbishing the 777-200 fleet.
If you want luxury you need to ante-up for premium economy or business class. The other day AIR had a business class special on the new Dreamliner to Perth for $1,199 each way. It crossed my mind to have a ride just for the heck of it but time doesn't presently allow. You get what you pay for mate and the public generally want cheap prices.
I believe air travel on a relative basis to what it has been over the years is very very cheap and there's a tidal wave of baby boomers who are pleased their kids have finally left home and now have disposable income and want to stretch their horizons. ( I acknowledge my own circumstances might affect my perspective) :)

[JohnnyTheHorse]

I picked up a good amount today. I'm picking that either tomorrow or Friday it will start to move higher and then it will push towards its previous highs of 227-229 on Tuesday (just before going ex-div on Wednesday). I will sell at some point on Tuesday with the anticipation of a 10-15cps capital gain. I see worst case scenario here (bar a market collapse or plane crash!) as breaking even, so a low risk play.

[slimwin]

Or a volcano in Iceland perhaps JTH?

[tzbang]

I picked up a good amount today. I'm picking that either tomorrow or Friday it will start to move higher and then it will push towards its previous highs of 227-229 on Tuesday (just before going ex-div on Wednesday). I will sell at some point on Tuesday with the anticipation of a 10-15cps capital gain. I see worst case scenario here (bar a market collapse or plane crash!) as breaking even, so a low risk play.

Why wouldn't you collect the divvy and then hold until it picks up again in a few weeks?

[couta1]

Why wouldn't you collect the divvy and then hold until it picks up again in a few weeks?
Because I'm guessing he's a hard core trader who prefers to work for his money rather than receiving handouts:cool:

[JohnnyTheHorse]

Why wouldn't you collect the divvy and then hold until it picks up again in a few weeks?

I will consider it if the NZ and US markets show a bit more strength over the next few days. I tend to prefer to have the capital free for other opportunities.

[winner69]

Rod Drury not happy with AIR proposal

http://www.nzherald.co.nz/hawkes-bay-today/news/article.cfm?c_id=1503462&objectid=11318916

[skid]

Hi Skid,

I understand where you're coming from, especially since I'm a big bloke but the vast majority of the world's airlines are moving to a pitch of about 32 inches in economy if they aren't there already. They're really caught between a rock and a hard place. As far back as I can remember, (I'm coming up 53), if you waited for a good special you could fly to London return for just on $2,000 plus taxes. Decades later the sale price is the same or very similar despite a massive increase in costs and this is what the general public wants. How many other products or services can you name that are the same nominal price as 25 or 30 years ago despite the effects of inflation over all those years ? I can't think of any !!!!!
Can't remember if you're experience was on a 777-300 or the older 200 series but I believe AIR are spending about $100m refurbishing the 777-200 fleet.
If you want luxury you need to ante-up for premium economy or business class. The other day AIR had a business class special on the new Dreamliner to Perth for $1,199 each way. It crossed my mind to have a ride just for the heck of it but time doesn't presently allow. You get what you pay for mate and the public generally want cheap prices.
I believe air travel on a relative basis to what it has been over the years is very very cheap and there's a tidal wave of baby boomers who are pleased their kids have finally left home and now have disposable income and want to stretch their horizons. ( I acknowledge my own circumstances might affect my perspective) :)

Im not sure which 777 it was-and Im not sure if Thai is a dieing breed with their roomier seating--but it was nicer--most seem to think that AIR is a good value so who am I to disagree--All Im saying is that if other airlines have roomier seating people are going to start to wonder why they are paying premium prices for budget type seating--Maybe its a SE Asia thing with Singapore up there as well (ok we wont mention MAL-but that was just bad luck-could of happened to any airline)
It would be interesting to compare the seating arrangement of all airlines-theres probably a website that does this.
Everyone needs to compete--you either cut costs (or increase seating -maybe skimp a bit on the meals) or you increase passenger numbers.
It cost us a fair amount to fly to Vancouver(and on to Montreal)(air Canada sucked ,by the way)
I also paid a bit more than normal for our THAI flight (used to always go for cheapest sales) That bit extra (it was still economy and a sort of sale )made a world of difference with Thai--With AIR.....well....
But like I said the plane was full so the dosh came in (at least in the short term) and of corse management is of key importance.
Airlines are not really my thing for investing--you can call them boring blue chip-but its a volatile industry as we have seen lately,but good luck to all who have invested--being a habitual traveler (just spent 3 weeks riding a motor bike around Northern Thailand with the basics strapped on)-I couldnt do without them.
wish I could have stayed longer but had to come back for several reasons,one of which was to apply for my pension.

One thing about riding around in a country like that (often in the middle of nowhere ) is the realization of how privileged but crazy our life here is.

[mp52]

...It would be interesting to compare the seating arrangement of all airlines-theres probably a website that does this.

Try this one on for size Skid: http://www.seatguru.com - would be interesting to see the numbers on the difference in seating between Thai and AirNZ.

The motorbike safari sounded like a blast. Fingers crossed I have the health and resources for similar adventures when I'm ready to step out of the rat race.

[skid]

Heres one i found after just a quick check
http://www.airlinequality.com/Experience/bestYclass_seats.htm

And yes in terms of the motorbike adventure--Im Hooked

[Beagle]

For aircraft aficionado's here's the goods on a the new super efficient 70,000 lb thrust Rolls Royce Trent 1000 engines AIR have chosen to power their Dreamliners
http://www.rolls-royce.com/civil/products/largeaircraft/trent_1000/

[Beagle]

LOL $2.23 now, you owe me a beer :D Worked out what you're going to spend your $3K divvy on yet ?

[Beagle]

Finally this puppy is in full afterburner ascent :D
https://www.youtube.com/watch?v=pIz0-_aho6o

[JohnnyTheHorse]

well this is going well so far. In at 2:17 on Wednesday. Hoping we can get to 2:30 before it goes ex.

I was targeting a 227-229 exit next Tuesday, however after today's price action I think we may get to 235, especially if US markets play ball.

[Beagle]

http://www.stuff.co.nz/business/industries/10464814/New-Zealand-set-for-tourist-boom?cid=edm:businessday:dailybrief

[couta1]

I was targeting a 227-229 exit next Tuesday, however after today's price action I think we may get to 235, especially if US markets play ball.
I will be very tempted to flick of a good sized block of mine I got at $2 if the price exceeds $2.30 before going ex, that's double the divvy amount and it may drop more than 15c after the ex date hmmm decisions decisions.

[Beagle]

I will be very tempted to flick of a good sized block of mine I got at $2 if the price exceeds $2.30 before going ex, that's double the divvy amount and it may drop more than 15c after the ex date hmmm decisions decisions.

AIR has the lowest PE of any of your stocks mate....food for thought ?

[dingoNZ]

I really wouldn't recommend this to be perfectly honest. Given the strength of the stock, I'd be surprised if it didn't revert back to the pre-ex date SP level within a week or two. Why, then, give away a hearty divvy?


I concur with this. Based on their performance of late, I suspect you will see some offshore buying pushing it up after ex-div.

[Beagle]

I will be very tempted to flick of a good sized block of mine I got at $2 if the price exceeds $2.30 before going ex, that's double the divvy amount and it may drop more than 15c after the ex date hmmm decisions decisions.

Mate all the evidence suggests that most stocks recover most of their dividend within a few weeks and in this case we are talking about fully imputed dividends of 15.5 cps so its a whopper.
Each block of 7,000 shares is over $1,000 dividend in your hand...why give that away to someone else ?
Also have a good read through the annual shareholder review that's just arrived in the mail, (I am happy to e.mail you a link if your haven't got yours yet), things look very encouraging for AIR and as mentioned earlier the stock is very cheap on an earnings basis. PE is less than 10. Selling what I would argue is perhaps the best stock you own for medium term capital growth, just because you're ahead is not the way to mitigate losses on your other holdings.

In my opinion this sideways market we have now is about fundamentals, buying good quality companies on realistic price earnings multiples which pay good dividends and enjoy good growth prospects. I've had a really good look through the annual accounts now and there's no fish hooks I can see and the company has heaps of imputation credits in its account so is in a position to attach full imputation credits to dividends for many, many years to come. The new Dreamliner that I've posted heaps of info about is a real game-changer and they have 9 more on order, (2 of which are due before Xmas), with options for another 8 which I expect they will exercise. This new plane gives them a genuine marketing edge regarding the quality of their flight experience going forward. AIR is my #1 pick for market outperformance in the medium term.

[Beagle]

I'm having a conversation by PM with a gentleman who's quizzed why I think a PE of under 10 is very good buying for AIR and as part of that I've analysed the average PE AIR has traded at for the last 5 years which I thought seeing as I've done the analysis I would share for everyone's benefit.

Looking at the current financial statements, five year summary, (page 55 of the 2014 financial statements) we have
Basic EPS of 23.8 cps for 2014 which on a closing SP for the year of $2.08, (30 June 2014) = a PE of 8.7
Basic EPS of 16.5 cps for 2013 which on a closing SP for the year of $1.49 (30 June 2013) = a PE of 9.03
Basic EPS of 6.5 cps for 2012 which on a closing SP for the year of $0.86 (30 June 2012) = a PE of 13.2
Basic EPS of 7.5cps for 2011 which on a closing SP for the year of $1.12 (30 June 2011) = PE of 14.9
Basic EPS of 7.6 cps for 2010 which on a closing SP for the year of $1.07 (30 June 2010) = a PE of 14.07

Average PE over the last 5 years is thus 11.98, call it 12.

In my view under 10 is good buying in general and all the more so with exceptionally low international and local interest rates pushing the average market PE of the NZX to around 18. PE's have become somewhat stretched all around the world as a result of long term interest rates being at record all time lows.

In addition AIR is very cheap on a relative PE basis to all the major airline stocks I've looked at.

Hope that helps people come to their own conclusions regarding whether the current PE is cheap or not.

[winner69]

For what's it worth the Morningstar 1 pager has these PE numbers. June price and trailing earnings as I understand the words attached.

June 2006 through June 2014 and last number being Sept 2014

8.6 / 11.6 / 5.3 / 6.0 / 12.5 / 14.8 / 13.7 / 9.0 / 8.1 and currently 8.9

Average of 10.0 (not counting current figure, only June years)

Inflated PEs when earnings dipped post GFC in 2010 thru 2012

Seems in normal times a PE of 10 is what the market thinks AIR is worth

The exercise for you now Roger is what were say 1 or 2 year shareholder returns when PE was below average

Geek note: sometimes 5 years is only a half cycle and gives funny numbers. I prefer looking at such things over at least one full cycle

[Beagle]

Any way you slice and dice this thing AIR is cheap on an average PE basis at present, most especially so in a post GFC ultra low interest rate / generally higher prevailing PE environment.


We remain very focused on continuing to build on our earnings momentum of the last three years.
Nothing is taken for granted, and we will be relentless in pursuing opportunities to further improve this iconic company for our investors, our customers and our people.

We have a very exciting year ahead. Concluding remarks from Christoper Luxon CEO in the annual shareholder review.
Does that sound like management have the right idea or what !!

Even at $2.24 the stock will be at a theoretical ex price of $2.085 this Wednesday. Notwithstanding the recent recovery in price on an ex divvy basis it still looks very cheap and I'm very happy to hold :)
I would buy more if I wasn't already pushing the boundaries of my self imposed 20% limit for any one stock.

P.S. W69 I haven't got info further back than five years but its interesting to note that in 2012 and 2013 when the PE was below average total shareholder return was 72.7% and 40.1% respectively, (source 5 year statistical review page 55 2014 financial statements).

[winner69]

Any way you slice and dice this thing AIR is cheap on an average PE basis at present, most especially so in a post GFC ultra low interest rate / generally higher prevailing PE environment.

Concluding remarks from Christoper Luxon CEO in the annual shareholder review.
Does that sound like management have the right idea or what !!

Even at $2.24 the stock will be at a theoretical ex price of $2.085 this Wednesday. Notwithstanding the recent recovery in price on an ex divvy basis it still looks very cheap and I'm very happy to hold :)
I would buy more if I wasn't already pushing the boundaries of my self imposed 20% limit for any one stock.

P.S. W69 I haven't got info further back than five years but its interesting to note that in 2012 and 2013 when the PE was below average total shareholder return was 72.7% and 40.1% respectively, (source 5 year statistical review page 55 2014 financial statements).

Just shows that old adage is true - above average returns when stocks are cheaper than they should be and conversely dispoointing returns when stocks are overvalued - even when profits keep increasing

Like AIR v SUM at the moment ..... and couta wants to sell the one with prospects of average returns and keep the ones that will probably underperform. Your advise to him was appropriate

[Beagle]

Just shows that old adage is true - above average returns when stocks are cheaper than they should be and conversely dispoointing returns when stocks are overvalued - even when profits keep increasing

Like AIR v SUM at the moment ..... and couta wants to sell the one with prospects of average returns and keep the ones that will probably underperform. Your advise to him was appropriate

I think I've just about convinced you too :D

[modandm]

no offence but I don't think some people on here understand how to value cyclical businesses very well... at least the PE analysis and conclusions being reached are misleading.

Let me explain

When AIR was earning very little (trough of the cycle), the PE multiple should be very high (20 or 30 times even). If earnings are negative like Qantas PE is undefined! At this time price to book is often used to value the stock.

When AIR is earning well with growth expected (mid cycle), the PE multiple should be medium - perhaps 12x

When AIR is earning best and investors expect things can't get much better, but could get a lot worse (peak of the cycle), the PE multiple should be low - possibly even 5 or 6 times.

In reality

At any time it is a best guess of where we are in the cycle and the cycle could improve or deteriorate on uncontrollable macro factors.

Investors tend to focus too much on the current - therefore putting too low a multiple when things are bad, and too high when things are good.

The question facing AIR investors now

Are we mid cycle or peak? I believe we are now mid-cycle - capacity growth so far has been limited. Over the next 3-4 years we will move towards peak, but I can't predict what will happen to the NZ or global economy.

Is AIR cheap? I believe so because earnings can grow 20%+ for the next 2-3 years, dividends can grow even faster, and free cash flow is rising as Capex declines past FY16. Further the VAH stake is worth some 30 cents per share.


My valuation now

I expect earnings of between 28-32cps this year. If you take 29c put that on a PE of 9 (late mid-cycle) you get $2.61. If you add the VAH stake at 30cps, and the upcoming dividend of 15c you get $3.06. That's my current valuation.

What valuation in 12 months?

I expect about 34cps in FY16. If you put that on a PE of 7.5x (nearing peak) you get $2.55, Again adding VAH stake you get $2.85 post dividend valuation in 12 months.
Between now and then you get 15c + at least 12c in dividends. So by another method today equals Valuation $3.12

Conclusion

PE's fall as earnings of cyclical stocks move through the cycle. Beware the cycle, know the company, and understand the factors impacting earnings in order to judge sustainability.

[winner69]

modandm, with due respect you comments re PE ratios through the business cycle are misleading or you didn't explain it very well.

The gist of it I agree with but the detail confuses me a bit.

Anyway looking at AIR from the depths of my black box I have charted AIRs EPS and earnings over the last 10 years and trailing PEs

As I see it when AIR earnings are down the PE goes above 12 but in between times the PE cycles between 8 and 12. I cant follow your rationale that when earnings are high the PE should fall to maybe 5.

All good though. As earnings have been increasing the market has not been reacting and the PE hasn't has declined. Looking forward one would think tat the PE could increase to 12 over the next 2 years.- just like it did in 2006/2007. But do you really expect it to fall to maybe 5?

Problem with AIR I that EPS has had many more earnings down years than up years so hard to feel comfortable about your reasoning. Also need to consider Rogers other points that this time its different with low interest rates etc.and of course there are now more shareholders than in the past.

Anyway methinks that based on how key players on the NZX have valued AIR in the past it is likely to be favourable rerated even though the underlying trend is that AIR is generally valued at less than 10 times earnings.

Whatever AIR looks undervalued at the moment - especially as that EPS line heads into the 30 cent plus range

[winner69]

I like to see where shareholder returns come from, ie from earnings growth, dividends or market reratings (PE expansion or contraction)

You might be interested in these numbers from the black box.

The last couple of years have been very good. A buy and hold investor would not have made any money over the preceeding 4 years. The 2007 gains were all wiped out in 2008.

Interesting to note that as earnings have increased the last 2 years the PE ratio has fallen. Investors have not benefited from the all the earnings growth.

Roger - maybe moandum is right and this is what does happen when earnings increase and the PE might fall maybe to 5.

I have taken the liberty what may happen over the next years, the numbers in yellow.

If this happens great returns can be expected.

Couta wants to sell next week! I wont be buying because I couldn't live with the thought that maybe I contributed to hundreds of people being killed in a crash. I will ensure the safety of AIR passengers (and well being of AIR investors) by staying out.

Laugh if you want to at my forecasts - I won't be offended.

Best wished to you all - no doubt you will do well

[couta1]

Thanks Roger for your thoughts.Hey winner just because I thought about selling doesn't mean I wasn't going to buy back on the ex divvy drop having made double the divvy amount by selling before the ex date, I'm into thinking outside the square these days and looking at all possibilities, if I don't sell and collect the divvy instead i have some money set aside elsewhere ready to buy another block if it goes low enough ex divvy so all bases covered,I'm into trying different things and having a bit of fun along the way:cool:

[noodles]

Thanks Roger for your thoughts.Hey winner just because I thought about selling doesn't mean I wasn't going to buy back on the ex divvy drop having made double the divvy amount by selling before the ex date, I'm into thinking outside the square these days and looking at all possibilities, if I don't sell and collect the divvy instead i have some money set aside elsewhere ready to buy another block if it goes low enough ex divvy so all bases covered,I'm into trying different things and having a bit of fun along the way:cool:

I don't know if you are having a laugh with that post, but just in case some novice traders are reading it, here 3 reasons why it is foolish.

1. All things being equal, the share price will drop by the amount of the dividend. So in this case, you will lose 2 lots of brokerage.
2. You will lose the imputation credit
3. Gambling is fun. Investing should not be fun. It should be satisfying.

[couta1]

I don't know if you are having a laugh with that post, but just in case some novice traders are reading it, here 3 reasons why it is foolish.

1. All things being equal, the share price will drop by the amount of the dividend. So in this case, you will lose 2 lots of brokerage.
2. You will lose the imputation credit
3. Gambling is fun. Investing should not be fun. It should be satisfying.
Noodles I'm not saying anyone should follow what I posted above but nothing wrong with thinking outside of the square and for people that bought at $2 or under the above idea could work well(If the price hits $2.30 or above before going ex)the imputation credit is no real advantage for those on the top tax rate, thirdly investing is satisfying but why can't it also have a fun element?

[vin]

as a complete novice trader who bought in a 2.20 I have no idea what to do :(!

trying to soak up as much info as I can..

have done alright with TUA, MET & PEB though if that helps

[couta1]

as a complete novice trader who bought in a 2.20 I have no idea what to do :(!

trying to soak up as much info as I can..

have done alright with TUA, MET & PEB though if that helps Well iI guess if your trading it you have 2 options,number one wait and see where it gets to on Tuesday before going ex and if your happy sell and take your profit or number two collect the divvy and then wait till it gets back to $2.20 or above and then sell depends on what would give you the most profit and your time frame:cool:

[winner69]

Well iI guess if your trading it you have 2 options,number one wait and see where it gets to on Tuesday before going ex and if your happy sell and take your profit or number two collect the divvy and then wait till it gets back to $2.20 or above and then sell depends on what would give you the most profit and your time frame:cool:

I think he should turn it into a medium to long term trade and watch it go to $3.50 plus before even worrying about what to do

[vin]

Roughly what sort of time frame would med-long term be?

[winner69]

Roughly what sort of time frame would med-long term be?

Months / years - as long as its going up 20% to 30% or more a year

If you not in love with and don't intend to hold forever just follow a decent trend

Some trades take years to play out.

One of FBU trades once took nearly 7 years to play out

[noodles]

Noodles I'm not saying anyone should follow what I posted above but nothing wrong with thinking outside of the square and for people that bought at $2 or under the above idea could work well(If the price hits $2.30 or above before going ex)the imputation credit is no real advantage for those on the top tax rate, thirdly investing is satisfying but why can't it also have a fun element?[/QUOTE
have done alright with TUA, MET & PEB though if that helps
When I get in front of a spreadsheet,I'll post a cash flow statement for those on 33% tax rate to prove my point.

Perhaps the fun question should be for another thread.

[Beagle]

Let me add to the debate. First things first we need to clear up what the actual earnings were for the 2014 year. As some of you know this isn't easy and the International Financial Reporting Standards, (IFRS), aren't in my opinion always the gold standard they purport to be.
Statutory profit after tax was $262m.
The normalised profit after tax you may have heard was a lesser figure due to removal of the fuel and exchange hedging and derivatives gains. That's fine but as far as I'm concerned as they're embarking upon these hedging and derivatives programs on an ongoing basis so this forms part of their actual earnings for the year. Whether they can repeat those gains in 2015 is obviously an open question.
Less obvious is their treatment of what in years gone past would have been considered to be an extraordinary item, (i.e. non-recurring), the $45m they spent on one off redundancies, heavy maintenance operation rationalisation and fleet rationalisation including fleet transition costs Air are moving to streamline their fleet and maintenance operations and these are one-off costs which they took above the line as a simple increase in labour costs.
If we add the net effect of that back $32.4m ($45m less the tax at 28% that they wouldn't be able to claim if this was seen as it should have been in more traditional times as an extraordinary item) we get true operating profit from ongoing operations inclusive of fuel hedging gains of $294.4m after tax or 26.5 cps.

On that basis I think EPS of approx. 30 cps is attainable for 2015, (excl VAH) provided the economy stays in reasonable shape and there's no major new geopolitical issues. VAH is too tough to value and given an uncertain outlook I have discounted any value in this investment at present until proven otherwise.
I accept to some extent we need to consider the trough / peak cycle PE rationale but I'm also aware that Airlines globally are now being viewed as growth stocks and global airline PE's continue to suggest there's significant room for AIR's current PE to expand. Whether it does or not, only time will tell. With all due respect to one or two previous comments, I think some people are seriously underestimating how much PE expansion has occurred around the world in a post GFC environment on the back of some of the lowest government stock rates in living memory. Have a look at some of the other airlines current PE's !!!
I think there's room for the SP to track north towards $3.00 as the 2014/5 year unfolds given reasonable global conditions. Air need to show they can utilise the capacity expansion they're bringing to market, (remember they have capacity expansion of circa 5% per annum planned for several years), and grow their top line consistent with capacity and if load factors stay consistent with 2014 and fuel prices remain stable then shareholders will enjoy excellent rewards as the year unfolds.

[noodles]

When I get in front of a spreadsheet,I'll post a cash flow statement for those on 33% tax rate to prove my point.

Perhaps the fun question should be for another thread.

Couta, as promised here is my cashflow statement for 2 scenarios:
1. Punter A buys AIR at $2 and holds to the ex-div date.
2. Punter B buys AIR at $2 and Sells at 2.30 on the close before the ex-div. Thus does not receive dividend

Assumptions:
1.Price falls to (2.30-15.5)=2.145 on ex div date
2.Both punters are traders and pay capital gains
3.The tax rate for both punters in 33%
4.The AIR dividend is fully imputed and taxed correctly (which AIR is)
5.No slippage and no interest received on funds(not material)
6.Brokerage rate of 0.3%
7.For tax purposes, the punter is a trader and liable for tax
8. Punter A buys back on the ex-div date

Punter A


Capital Gains (unrealised)
0.1450


Capital Gains Tax
-0.0479


Div received
0.1550


Add Tax on Div*
0.0000






Cashflow Position
0.2522



Punter B


Capital Gains (realised and including brokerage of .0129)
0.2871


Capital Gains TAX
-0.0947


Div received
0.0000


Add Tax on Div
0.0000










Cashflow Position
0.1924




So in summary, you are better of holding.

*A note from the IRD website:


You only need to tell us about dividend income if the total was


greater than $200 and it wasn’t taxed at the correct rate, or if


you are liable for child support.


All dividends have tax deducted at 33%



Disclaimer: I'm not a tax consultant. I suggest you seek advice and don't rely on my calculations.

[Beagle]

There's so many different variables depending if people are traders, declaring their gains or trying to avoid them or investors and much depends on people's personal tax rate.
One thing to be aware of is that the maximum imputation credit a company can attach to a dividend is 28%, (their own company rate) and the other 5% is taken out of the dividend by way of dividend withholding tax and remitted by the company to the IRD and needs to be claimed back in people's tax returns where their personal rate is less than 33%, (<$70,000 personal income).

I suppose I should trot out the well worn line that if people are unsure how to optimise their position they should take professional advice.

[noodles]

There's so many different variables depending if people are traders, declaring their gains or trying to avoid them or investors and much depends on people's personal tax rate.

I agree. I've included the individuals tax position in the assumptions. This appears to be Couta's position.

[modandm]

I accept to some extent we need to consider the trough / peak cycle PE rationale but I'm also aware that Airlines globally are now being viewed as growth stocks and global airline PE's continue to suggest there's significant room for AIR's current PE to expand. Whether it does or not, only time will tell. With all due respect to one or two previous comments, I think some people are seriously underestimating how much PE expansion has occurred around the world in a post GFC environment on the back of some of the lowest government stock rates in living memory. Have a look at some of the other airlines current PE's !!!
I think there's room for the SP to track north towards $3.00 as the 2014/5 year unfolds given reasonable global conditions. Air need to show they can utilise the capacity expansion they're bringing to market, (remember they have capacity expansion of circa 5% per annum planned for several years), and grow their top line consistent with capacity and if load factors stay consistent with 2014 and fuel prices remain stable then shareholders will enjoy excellent rewards as the year unfolds.

Good post.

Agree that PE's have been on the up, but calling airlines growth stocks is a big stretch. Just because some investors are being stupid and overvaluing some airlines (in my opinion), doesn't mean we should with AIR. There is a saying in the investment industry - 'this time its different'. Again and again time proves that its not different.

I maintain that as we move into FY15 and FY16 using an 8x PE multiple is appropriate for AIR, and consistent with the somewhat low valuation NZ investors have traditionally applied to the stock. After years invested, and numerous discussions with management, I have to conclude that some of this discount is warranted, because like it or not its still government owned, and management is not acting 100% to maximize shareholder returns.

Don't worry too much folks - there's still 40% upside on my valuations.. :)

-mod

[Beagle]

Good post.

Agree that PE's have been on the up, but calling airlines growth stocks is a big stretch. Just because some investors are being stupid and overvaluing some airlines (in my opinion), doesn't mean we should with AIR. There is a saying in the investment industry - 'this time its different'. Again and again time proves that its not different.

I maintain that as we move into FY15 and FY16 using an 8x PE multiple is appropriate for AIR, and consistent with the somewhat low valuation NZ investors have traditionally applied to the stock. After years invested, and numerous discussions with management, I have to conclude that some of this discount is warranted, because like it or not its still government owned, and management is not acting 100% to maximize shareholder returns.

Don't worry too much folks - there's still 40% upside on my valuations.. :)
-mod

I think broadly we're on the same page but arrive at a $3.00 price through slightly different methods. Once they prove they can use the capacity expansion I think we're in clover :)
I'll have a chat with management at the AGM to check if the new Dreamliner is performing according to specifications.

[mikeybycrikey]

I'm just wondering where the additional profit is coming from. People on this thread are predicting 30-35cps profit in the next couple of years but I just don't see it happening.

From memory, much of the additional profit growth came efficiencies rather than actual growth in passenger numbers or revenue. I might be generalising a little though (I could spend an hour going through the annual report to try and back this up but maybe another time).

In the 5 major markets that they serve, there was only growth in two of them. Efficiencies are good but they aren't a sustainable method of growing the business over the long-term, especially for a business like Air NZ that is supposedly running pretty lean already.

[Beagle]

5% capacity growth if utilised would be another ~ $250m on the top line. Dreamliners use 20% less fuel, (fuel costs were ~ $1.2b last year), and have heaps of extra cargo capacity. Last year's true EPS ex of extraordinary items was 26.5 cps...join the dots and extrapolate. The key is whether there's demand for the extra capacity they're putting on. I agree there's plenty of work for their sales and marketing team to do.

[mikeybycrikey]

The Dreamliner isn't really coming on-stream for another 12-18 months with 2 more delivered in FY15 and 3 in FY16. 20% fuel saving is significant but it's only for a small but growing percentage of the fleet (it's unclear what that will mean in fuel savings). 5% capacity is good but as you say it still needs to be filled for AIR to benefit.

Slightly off-topic but I'm starting to consider a possible hit to the economy in the next 12 months because of the significant fall in dairy exports. Air NZ is a low margin, high-capital business that can easily have its profits hit by a small drop in sales. Economic forecasting is hard though!

Anyway, as you say, 30cps might be possible (and isn't a big leap from 26.5cps) but airlines are a very risky business (hence low P/E) and if there are headwinds in this rockstar economy, 30cps could easily turn into 10cps within 12 months no matter how well run the company is.

[Beagle]

Economists are still predicting GDP growth and there's the solid growth in tourism that's been forecasted too :)

[Marilyn Munroe]

The other thing I want to ask about is whether the new Dreamliner is performing as expected..

An answer to your query is in the offing. The invesigative unit of Aljazeera TV is to broadcast its findings about the 787 in a few days.

It wiil be available on Freeview channel 16 on Thurs 11th at 0800 NZ Time. I have set my VCR to record the programme.

The development of the 787 has been troubled and overlong. I will be paying attention in the progemme for any hint as to the operational performance of the aircraft.

A bad choice of aircraft can be devastating for an airline, so this programme may give us a steer towards Cullen Airlines future.

Boop boop de do
Marilyn

http://www.aljazeera.com/investigations/boeing787/default.html

[Beagle]

Thanks love but new aircraft types being very late are nothing new and the initial battery problems have already been well publicised as have the initial stress cracking in certain areas that had to be strengthened.
I'll watch but won't be expecting any dramatic new revelations. I was referring to a piece of info, (which at this stage is not verified) that its not quite right up to the mark with fuel savings, (slightly overweight) but there isn't much in it, in terms of expected v actual fuel burn and operational performance. I'll have a chat with management at the AGM and have a talk to my pilot friend as well. (He doesn't want to change to the Dreamliner because he'd have to take a pay cut from the 777). But really, we all know its late, we know most airlines have negotiated a meaningful compensation package regarding this and does it really matter if the CASK savings over a 767-300ER are 18.5%-19% instead of 20%...
Aljazeera won't have any specific information that's of relevance to the long range stretched 787-9 because Air's version is the first of its type in the world...I believe they call that First Mover Advantage :)

[Okebw]

Mopped up a few more this afternoon on the weakness created by the divide hounds. It comes in quite handy being a student as the divie is imputed more than the tax I have to pay.

Roger, I wound up with $2.92 for my valuation so quite similar.
Did you factor in the reduced interest income from the special divie?

[Beagle]

Hi Okebw

No question the payment of final and special divvy's totalling $172m is material but free cash flow was very strong last year at ~ $730m so I didn't get into trying to second guess any impact on invested income or borrowing costs as a result of the dividends.

As you've astutely noticed, anyone of a tax rate below 28% gains an additional benefit from dividends being fully imputed at that rate. I would have bought more but am right on my 20% limit for any one stock as a percentage of my portfolio. Nice buying :)

[psychic]

Huh? AIR ex div today? The announcement said Friday.

https://www.nzx.com/companies/AIR/announcements/254452
Details of Final and Special Dividends
* Record Date for Final and Special Dividends: 12 September 2014
* Payment Date for Final and Special Dividends: 22 September 2014

[freddagg]

Huh? AIR ex div today? The announcement said Friday.

https://www.nzx.com/companies/AIR/announcements/254452
Details of Final and Special Dividends
* Record Date for Final and Special Dividends: 12 September 2014
* Payment Date for Final and Special Dividends: 22 September 2014

Record date is Friday. Last day you can trade cum dividend was yesterday because it takes three days for a trade to be recorded.

[psychic]

Record date is Friday. Last day you can trade cum dividend was yesterday because it takes three days for a trade to be recorded.

thanks Fred

[Hoop]

Huh? AIR ex div today? The announcement said Friday.

https://www.nzx.com/companies/AIR/announcements/254452
Details of Final and Special Dividends
* Record Date for Final and Special Dividends: 12 September 2014
* Payment Date for Final and Special Dividends: 22 September 2014

Some posts on this AIR thread can be informative....;)

http://i458.photobucket.com/albums/qq306/Hoop_1/zzzz.png (http://s458.photobucket.com/user/Hoop_1/media/zzzz.png.html)

[JimHickey]

Huh? AIR ex div today? The announcement said Friday.

https://www.nzx.com/companies/AIR/announcements/254452
Details of Final and Special Dividends
* Record Date for Final and Special Dividends: 12 September 2014
* Payment Date for Final and Special Dividends: 22 September 2014
Jesus Christ.

[psychic]

lol, er yes, sorry hoop. Clearly demonstrates how much interest I usually take in divs..

[Beagle]

Jesus Christ.

No, but feel free to thank those of us mortals who took the time and trouble to communicate our request for a special dividend to the board :)

[Hoop]

lol, er yes, sorry hoop. Clearly demonstrates how much interest I usually take in divs..

Shhhh....we won't tell Roger that...:D

[Beagle]

Shhhh....we won't tell Roger that...:D
LOL big Rodge didn't hear that, rumour has it he's busy loading up his credit card with thousands of dollars of goodies know said divvy will clear same and put it back in credit :D

[bohemian]

Jesus Christ. I find your profanity particularly offensive. If you feel that you need to express yourself in this way I suggest that you do so on some left wing blogs such as The Standard and Daily Blog.

[sb9]

No, but feel free to thank those of us mortals who took the time and trouble to communicate our request for a special dividend to the board :)

Nice work Roger, thanks for putting forward the recommendation for special divvy, appreciate it.

[freddagg]

No, but feel free to thank those of us mortals who took the time and trouble to communicate our request for a special dividend to the board :)

Possible that someone from Govt made the same request.

[Beagle]

I find your profanity particularly offensive. If you feel that you need to express yourself in this way I suggest that you do so on some left wing blogs such as The Standard and Daily Blog.


Possible that someone from Govt made the same request.

Agreed x 2

[JimHickey]

I find your profanity particularly offensive. If you feel that you need to express yourself in this way I suggest that you do so on some left wing blogs such as The Standard and Daily Blog.Are you serious?

Just lol.

[kuotadriver]

In my experience, it takes more than a few months flying to ascertain the efficiency, or lack thereof, of a new type. I don't know if the Dreamliner has even been deployed on a long haul route yet.

[slimwin]

Don't worry Jim. People can be offended all they like. It still doesn't make them right....

Back to dreamliners. I hope to get my first ride next month. Can't wait.

[couta1]

Are you serious?

Just lol.
Yes a lot of people are very serious about open blasphemy on a public forum,its offensive and unessessary and adds nothing to discussing Air as a company.

[Okebw]

So I'm all for the CEO being rewarded for doing a great job and having a long term incentive plan in place.
But did anyone else notice that he's been issued 4,020,826 shares in the last week...?
Unless I'm misreading the announcements somehow.

https://www.nzx.com/companies/AIR/announcements/254941
https://www.nzx.com/companies/AIR/announcements/255102

[dingoNZ]

So I'm all for the CEO being rewarded for doing a great job and having a long term incentive plan in place.
But did anyone else notice that he's been issued 4,020,826 shares in the last week...?
Unless I'm misreading the announcements somehow.

https://www.nzx.com/companies/AIR/announcements/254941
https://www.nzx.com/companies/AIR/announcements/255102

Read the dates, he wasn't around for those periods so one would assume its the long term incentive for the previous CEO ie in FY09/10 as per the document.

[Beagle]

Yes a lot of people are very serious about open blasphemy on a public forum,its offensive and unessessary and adds nothing to discussing Air as a company.

Absolutely 100% agree, well said.

[couta1]

Bought another parcel at $2.06 didn't look like it was going to go lower then bang the big boys come out to play:eek2:

[skid]

Havent really been keeping up but with your purchase at 2.06,were you better or worse off buying after the divi--as has been discussed earlier in the week

[Marilyn Munroe]

An answer to your query is in the offing. The invesigative unit of Aljazeera TV is to broadcast its findings about the 787 in a few days.

...... I will be paying attention in the progemme for any hint as to the operational performance of the aircraft.



The programme didn't have any information about the operational performance of the aircraft.

The sequence where the maunfacturer of lithium ion batteries for military aviation put a bullet through one and caused a runaway fire was scary.

Boop boop de do
Marilyn

[couta1]

Havent really been keeping up but with your purchase at 2.06,were you better or worse off buying after the divi--as has been discussed earlier in the week This is an extra block on top of my main block which I collected the divvy on, wasn't worth selling my main block pre divvy as the price didn't exceed my $2.30 plus figure to make it worthwhile. If it heads back to around $1.90 then those that sold at $2.26 pre divvy would be pretty happy I imagine.

[Beagle]

The programme didn't have any information about the operational performance of the aircraft.

The sequence where the maunfacturer of lithium ion batteries for military aviation put a bullet through one and caused a runaway fire was scary.

Boop boop de do
Marilyn

I forgot to watch to be honest. FAA have approved the new designed battery pack so I'm not concerned. I'll check with management at the AGM to see how the new bird is performing.

[couta1]

Noodles I forgot to thank you for your effort in working things out the other day so thank you:cool:

[noodles]

Noodles I forgot to thank you for your effort in working things out the other day so thank you:cool:
You are most welcome

[Beagle]

Out with the old.
http://tvnz.co.nz/national-news/air-new-zealand-s-747-goes-into-retirement-6078641
And in with the new
http://www.nzherald.co.nz/travel/news/article.cfm?c_id=7&objectid=11320804
Interesting to note the shiny new puppy seems to be making quite an impression.

[777]

Out with the old.
http://tvnz.co.nz/national-news/air-new-zealand-s-747-goes-into-retirement-6078641
And in with the new
http://www.nzherald.co.nz/travel/news/article.cfm?c_id=7&objectid=11320804
Interesting to note the shiny new puppy seems to be making quite an impression.

Puppies grow into dogs. Be careful.

[tzbang]

wasn't expecting the ex-div to fall this far, it's almost tempting to pick up more AIR at this price given it's forecast for 2015. Thoughts?

[dingoNZ]

wasn't expecting the ex-div to fall this far, it's almost tempting to pick up more AIR at this price given it's forecast for 2015. Thoughts?


Exactly my thoughts

[Beagle]

Good buying opportunity in my opinion. I'm at my maximum comfortable level with this stock and a happy holder.
I love planes, (just in case this isn't obvious already LOL), the stock is very cheap and management are confident of more growth ahead :)

[couta1]

wasn't expecting the ex-div to fall this far, it's almost tempting to pick up more AIR at this price given it's forecast for 2015. Thoughts?
Goes to show you can't always predict the market even when the company is looking rosy, I thought $2.05 would have bottomed it out but then big volume arrived yesterday with a keenness to sell and that changes the whole game.

[skid]

well...I guess that answers my question

[dingoNZ]

White-noise in the scheme of things, just a chance to pick up more cheap. Remember their growth prospects are still fantastic, I would be surprised it it was at $2.25 in 2 months.

[skid]

Maybe yes and maybe no-but its still interesting in terms of the buying in relation to Dividend theory
As for the growth prospects ,airlines are one of the harder COs to make assumptions on-there are just so many variable factors involved--(price of fuel-will the dream liners live up to expectations?,and if so ,thats a big plane to fill if demand drops off for some other reason) Will they increase landing fees for a plane so big that when 2 land close together it chokes up the airport facilities?
Im personally looking forward to them over the 777s but going big, ups the anti in many ways for the co. and if they cram them full of seats (like they have done with the 777s) i think it could come back to bite them in the long run.
The last man in charge did a good job--will this one be able to step up?

All that aside -It looks like it would be better to have bought on Fri than before the Divi.

[Beagle]

According to the well regarded Australian Aviation magazine September issue (available at your local Witcoulls), the new Dreamliner has been on the Sydney route since early August. The manager in charge of flight operations is reported as saying its performing exactly as expected. Passenger feedback on the flight experience has been very positive and the staff are also really enjoying it. There's another one due this month and a further one due before Xmas.
Its a very important matter that this new type is performing right up to its specifications as there's lots of them coming.

[modandm]

Hi folks. Certainly a precipitous fall in the NZD over the last few weeks. Here's hoping for a recovery post the election (and a good election result). With hedging in place at c.83c it would take a further fall down to around 75c before I started cutting estimates, but it has been bad timing given the USD capex coming up. On the other hand the euro has dramatically weakened (A320's and ATR's are Euro).

The next catalyst for the stock is the annual shareholder meeting.

[noodles]

Hi folks. Certainly a precipitous fall in the NZD over the last few weeks. Here's hoping for a recovery post the election (and a good election result). With hedging in place at c.83c it would take a further fall down to around 75c before I started cutting estimates, but it has been bad timing given the USD capex coming up. On the other hand the euro has dramatically weakened (A320's and ATR's are Euro).

The next catalyst for the stock is the annual shareholder meeting.
Oil has also be dropping. This should lessen the impact of the currency drop on fuel prices

[Beagle]

Oil is close to an 8 month low and substantially cheaper than it was 3 months ago. (e.g.Brent is down about $U.S15 a barrel).
I'd be surprised is they weren't almost fully hedged regarding near term capex.

[Beagle]

According to the well regarded Australian Aviation magazine September issue (available at your local Witcoulls), the new Dreamliner has been on the Sydney route since early August. The manager in charge of flight operations is reported as saying its performing exactly as expected. Passenger feedback on the flight experience has been very positive and the staff are also really enjoying it. There's another one due this month and a further one due before Xmas.
Its a very important matter that this new type is performing right up to its specifications as there's lots of them coming.

I should add that my pilot friend at AIR tells me that they've got the tarmac turnaround time down to 1 hour from 2 hours, (which is very important). He also tells me its great that AIR specified the 787-9's with Rolls Royce Trent 1000 engines as the other engine variant that some other airlines have chosen have major problems. I'll cut and paste some of his e.mail which explains it better.

They got the better engines I believe. B747-800s and b787s with the GE engines have a major problem with ice crystal icing causing flameouts. So much so that operators with the GE variants are told to avoid ice crystal icing conditions at all costs. Usually ice crystals are at high altitudes above or in the tops of or in the vicinity of thunderstorm type clouds.

They should be popular with pax with the bigger windows, lower cabin altitude and better humidity.

[Marilyn Munroe]

B747-800s and b787s with the GE engines have a major problem with ice crystal icing causing flameouts. So much so that operators with the GE variants are told to avoid ice crystal icing conditions at all costs. Usually ice crystals are at high altitudes above or in the tops of or in the vicinity of thunderstorm type clouds.



Here is link to a fuller explanation of the engine icing issue Roger was refering to.

http://blogs.crikey.com.au/planetalking/2013/11/29/faa-warns-787-engine-fault-could-cause-forced-landings/

Boop boop de do
Marilyn

PS. On the other had it was a Trent engine the blew up on the Queer and Nasty Airlines A380 at Singapore.

[Robomo]

PS. On the other had it was a Trent engine the blew up on the Queer and Nasty Airlines A380 at Singapore.

The A380 engine failure was due to a manufacturing fault (misaligned drilling of an oil-feed stub pipe), not a design error.

The design of the GE engine is different, which allows ice crystal formation (but don't ask me exactly what that design difference is!).

[Blue Horseshoe]

http://m.aljazeera.com/index/20149481032985564

Hope your life insurance is up to date.




Don't worry Jim. People can be offended all they like. It still doesn't make them right....

Back to dreamliners. I hope to get my first ride next month. Can't wait.

[Beagle]

http://m.aljazeera.com/index/20149481032985564

Hope your life insurance is up to date.
Already been well discussed and problems completely rectified. What part of an all new technology plane having initial teething problems is so hard to understand... I'd leap at the chance to fly a Dreamliner compared to an old tech plane and be more than happy to take my wife, children and grandchildren on one.

[Okebw]

Crashed through the psychological support at $2 and doesn't appear to have settled yet. Anyone have insight as to why?
The depth appears much much lighter on both sides since the price adjustment from the divie and these swings in prices seem to be coming from relatively light trading. No broker estimates or news that should be impacting it as far as I can see. ASB still has it at $2.20 and Craigs at $2.50

[couta1]

Crashed through the psychological support at $2 and doesn't appear to have settled yet. Anyone have insight as to why?
The depth appears much much lighter on both sides since the price adjustment from the divie and these swings in prices seem to be coming from relatively light trading. No broker estimates or news that should be impacting it as far as I can see. ASB still has it at $2.20 and Craigs at $2.50
The market is like a rollercoaster she goes up and she goes down no reason needed other than just doing what it does but the election may be weighing on things at the moment.

[Hoop]

Crashed through the psychological support at $2 and doesn't appear to have settled yet. Anyone have insight as to why?
The depth appears much much lighter on both sides since the price adjustment from the divie and these swings in prices seem to be coming from relatively light trading. No broker estimates or news that should be impacting it as far as I can see. ASB still has it at $2.20 and Craigs at $2.50

The investor payout 5.5c + 10c triggered sell signals on the ex day...the technical reason why?.. TA seems to show the sell down on the EX day and the low volumes of trade since is due to the previous high prices being pushed into oversold levels partially due I suspect to demand from divy hunters...and now there's lack of trading demand EX DIV to keep the div adjusted price up at those oversold levels ($2.10 ex adjusted)..
Where is fair value? ..TA wise.. if the bull cycle uptrend remains intact AIR should nearly be corrected by now..there is a Primary up trend / EMA200 conjunction around the 195ish area

On the Fundamental side AIR is poorer now due to the investor payouts.....The special Div two-edged sword has been swung....



The market is like a rollercoaster she goes up and she goes down no reason needed other than just doing what it does but the election may be weighing on things at the moment.
You are not being observant Couta...

[Beagle]

Even with the special divvy AIR paid out less in divvy's (20 cps) than its core EPS last year so although yes, technically AIR will be poorer upon payment on 22 September 2014 than they will be on 21 September (after payment of $172m in divvy's), this came from liquid resources of over $1.2 billion as at 30 June 2014. Recall too that cash flow was $730m last year and if replicated this year amounts to $183m per quarter and with the current quarter nearly over you could easily make the case that all these divvy's have done is pay out the current quarter's cash flow and AIR is in just as great shape as it was as at 30 June 2014 :D

I suspect Couta1's not far off the mark with that comment. Whist it seems XXXXXXXXXL Kim Dotcom made a fool of himself last night it just creates a little bit of uncertainty in some people's minds. I think we're all good for the another term from National and John is the minister of tourism so rational growth policies in this area will continue and we're very well positioned :)

Reuters is showing six analyst opinions.
Buy 2
Outperform 3
Underperform 1

[mikeybycrikey]

XXXXXXXXXL Kim Dotcom

So blasphemy isn't ok here but fat jokes are? Can we have some consistency?

[Beagle]

So blasphemy isn't ok here but fat jokes are? Can we have some consistency?

Merely stating a fact, he is an extremely large gentleman of unusual proportions.

[couta1]

Merely stating a fact, he is an extremely large gentleman of unusual proportions.
Yep and his size would be the lest corrupt of his attributes:eek2:

[winner69]

Crashed

Please please do not use that word on this thread

Sends the shivers up my spine and freaks me out

One reason why I don't trade AIR

[skid]

The investor payout 5.5c + 10c triggered sell signals on the ex day...the technical reason why?.. TA seems to show the sell down on the EX day and the low volumes of trade since is due to the previous high prices being pushed into oversold levels partially due I suspect to demand from divy hunters...and now there's lack of trading demand EX DIV to keep the div adjusted price up at those oversold levels ($2.10 ex adjusted)..
Where is fair value? ..TA wise.. if the bull cycle uptrend remains intact AIR should nearly be corrected by now..there is a Primary up trend / EMA200 conjunction around the 195ish area

On the Fundamental side AIR is poorer now due to the investor payouts.....The special Div two-edged sword has been swung....



You are not being observant Couta...

Couts uses PA instead of FA or TA= Philosophical analysis:)

[Beagle]

Well putting my philosophical analysis hat on after a tough day's SP action I'm wondering (seeing as the coy's dividend reinvestment scheme is presently inoperative), how many investors will initiate their own reinvestment scheme with their monster divvy cheque ?

[skid]

Yep and his size would be the lest corrupt of his attributes:eek2:

He is not the point--the point is national is in bed with America (with all its bad habits)

I dont think to many think this will bring down National--But a wake up call on this matter is not a bad thing.. National needs the reigns pulled in as we have well seen in recent times--Those backhanders for financial gain(minister of justice -give me a break) is one of those American traits we could well do without.

[couta1]

Couts uses PA instead of FA or TA= Philosophical analysis:)
Yep and my Philosophical analysis tells me when i add the profits of the sale of my play parcel purchased last week to my big divvy payment in a few weeks time that i will be Philosophically very happy with the resulting cash pile:cool:

[barleeni]

So blasphemy isn't ok here but fat jokes are? Can we have some consistency?

Tend to agree, I find Rogers posts to have been by far the most informative, constructive and meaningful of all on this thread, and long may they continue.... So the XXXXXL swipe comes as a bit of a surprise. A mans size isn't relevant in any way shape or form to this thread, and Skid has a point, National could do with a reality check perhaps.

[Hoop]

Yep and my Philosophical analysis tells me when i add the profits of the sale of my play parcel purchased last week to my big divvy payment in a few weeks time that i will be Philosophically very happy with the resulting cash pile:cool:

Look forward to it Couta.....:)
Been a bit of gloom on ST lately, so seeing a frolicsome frisky facetious festive Philosopher would be a nice change..eh?

[winner69]

This day a year ago AIR was 135 which was 8.2 times F13 earnings

Today it is 197 which is 7.6 times F14 earnings

So great returns who held from a year ago - 46% plus 14% in dividends plus any imputation credits

But what must a few including Roger is that the market thinks less of AIR today than a year ago (lower PE)

If the market had just maintained how it felt about AIR (held PE) its shareprice would be 212 today

Maybe modandum was right - the more AIR make the lower the PE

Bit puzzling eh Roger - maybe after ASM it'll all change. But last year the ASM didn't seem to change things.

It was the sell down that boosted the price .... maybe a Greens buyback next year will help

[Beagle]

Not sure what E figure you're using mate ?
Based on statutory profit after tax, (includes fuel and currency hedge gains I get $262m / 1112m shares for EPS of 23.56 and a current PE based on today's low closing price of $1.97 of 8.36 so PE has expanded a little. Nice try :) Use the profit figure excluding fuel and derivatives gains and the PE has expanded a little more so your contention and mod's theory don't appear to hold water.
If the Greens talk to me nicely I'll let them have mine at $3.30, (hey they can pay a 10% premium to fair value if they want them) :D

[winner69]

Being lazy, Roger, using a 25.85 cents per share as per Morningstar database which they call normalised

[jamiec26]

Probably a silly question.. I'd like to go to the AGM being a shareholder.. do i have to RSVP somewhere?

[jamiec26]

Probably a silly question.. I'd like to go to the AGM being a shareholder.. do i have to RSVP somewhere?


found it... http://www.airnewzealand.co.nz/assets/PDFs/proxy-from-example-2014.pdf

[sb9]

Hi Folks

Looks like this puppy is struggling to inch up ex div, any reason why and does this offer good buying opportunity at current SP level....appreciate your thoughts, esp from Roger :)

[dingoNZ]

Hi Folks

Looks like this puppy is struggling to inch up ex div, any reason why and does this offer good buying opportunity at current SP level....appreciate your thoughts, esp from Roger :)

If offshore markets are down overnight I will be buying a parcel tomorrow :)

[Beagle]

Hi sb9,

Good buying opportunity in my opinion. New Dreamliner is going very well, oil is relatively cheap, foreign exchange hedging is in place for the next two 787-9's at circa 83 cents U.S.
I think the current weakness is mainly reflecting political concerns. With Air's near monopoly on domestic routes there may be a little caution in the market as to what a Labour alliance could propose in this area. The market hates uncertainty so until a National lead coalition is confirmed, (which may not be until several days after the election), Air may remain a good buying opportunity.
The special and final dividends are paid out on Monday next week and it wouldn't surprise me if some people choose to reinvest them back into the airline's shares.
We should get operating stat's for August next week and the forthcoming annual meeting on 30 September is another opportunity for the Directors to update shareholders on current year's progress.

[RTM]

Hi sb9,

(which may not be until several days after the election),

You reckon Winston will do his dance is several days Roger. Might well be several weeks ! Wonder what will happen with our $ while all that is going on ?

[dingoNZ]

Remember the conservatives might leave Winnie out to dry still!

[777]

You reckon Winston will do his dance is several days Roger. Might well be several weeks ! Wonder what will happen with our $ while all that is going on ?

Winstone won't enter in to it. Won't be needed.

One trading day before the election. Decisions.

[Beagle]

You reckon Winston will do his dance is several days Roger. Might well be several weeks ! Wonder what will happen with our $ while all that is going on ?

Trying not to unsettle anyone. I think its a given Winston will take all the time he feels is necessary to make a decision that's in the best interests of...you guessed it, Winston :)
I have plenty of AIR on board already so anyone buying today won't get any competition from me.

[Zaphod]

This might help grow the pie for the intensely competitive trans-tasman market.

Of course there is no mention of what the fee may be dropped by.

----

Departure taxes in Oz under lens

Passanger departure taxes in Australia are being reviewed following a campaign to have the A$55 ($61) charge cut to help stimulate more transtasman travel.

Australia's Immigration and Border Protection Minister Scott Morrison has announced the Australian customs and border agencies would carry out the review of the services - which include charging - and was now seeking written submissions from the travel and tourism industry during the next few months.

He said after the tax office, immigration and border protection was the "biggest tax collector" in the country, gathering about A$3 billion in revenue each year.

Airport and security charges in New Zealand are around $35.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11327299

[Beagle]

^^ Make a grab-a-seat $69 special to Queenstown look mighty appealing, avoiding all those pesky charges not too forget its arguably one of the most beautiful places in the world :)
Doesn't seem like there's any institutional demand for the stock until the election is done and dusted.

[Zaphod]

^^ Make a grab-a-seat $69 special to Queenstown look mighty appealing, avoiding all those pesky charges not too forget its arguably one of the most beautiful places in the world :)

Very much so! I was in Canberra and got talking to a guy who was decrying how expensive it was to get to Thredbo for skiing, as opposed to Queenstown. There are definitely some further opportunities in the trans-Tasman market to improve both passenger volumes and overall yields.

Let's hope things pick back up after the election! Good luck to all holders!

[Master98]

smarts drive Air NZ success

http://www.stuff.co.nz/business/industries/10519234/Smarts-drive-Air-NZ-success

National Party had a great win in this election, hopefully AIR will be a very good performer on Monday like all other state controlled companys.

[Beagle]

smarts drive Air NZ success

http://www.stuff.co.nz/business/industries/10519234/Smarts-drive-Air-NZ-success

National Party had a great win in this election, hopefully AIR will be a very good performer on Monday like all other state controlled companys.

Yes its a real relief that we are not held hostage to potentially several weeks of Winston Peter's holding the whole country to hostage.
AIR got beaten down to $1.91 at the close on what looks like a day when many stocks were subject to index rebalancing in the final 15 minute match process. They traded most of the day at $1.94.
I expect in the unlikely event of an enquiry into regional fares AIR will easily be able to show that increases are justified based on higher airways and landing fees charges.
I'm expecting a good day on Monday and if for some reason it initially languishes at Friday's close then it's HAMMER time:t_up:

[dingoNZ]

Good news for those of us who use the DRP potentially, if the price goes up in the coming week. The DRP price is determined the last 5 days after ex-div

[Zaphod]

Good news for those of us who use the DRP potentially, if the price goes up in the coming week. The DRP price is determined the last 5 days after ex-div

There's no DRP. As discussed previously, the company has a large amount of surplus cash already (hence the special 10cps dividend) and so doesn't need to retain any.

[Beagle]

Dividend reinvestment plan is presently suspended as AIR has no need for extra cash but nothing to stop people running their own DRP. $172m total divvy's paid on Monday, 53% of it to the Govt but a considerable $81m of it goes into investors hands...one wonders how much of that will find its way back into buying more AIR shares.

[Huskeez]

What a bargain

[Huskeez]

The Funds seem too be loving AIR as well :)

[Zaphod]

Air NZ selling cabin design business

Air New Zealand is selling its aircraft interior design company Altitude Aerospace Interiors to British company AIM Aviation for an undisclosed sum.

http://www.stuff.co.nz/business/industries/10530294/Air-NZ-selling-cabin-design-business

[couta1]

has anybody physically received their divvy yet??
Yep yesterday afternoon.

[Beagle]

has anybody physically received their divvy yet??

Good idea to have them direct credited. My bank account is looking good this morning :)

[dingoNZ]

Yep yesterday afternoon.

Same with me. Maybe check details on Link?

[winner69]

has anybody physically received their divvy yet??

In your nominee account?

[Master98]

has anybody physically received their divvy yet??

what's going on? we all care about you.

[777]

has anybody physically received their divvy yet??

Or in your letter box?

[Okebw]

has anybody physically received their divvy yet??

Nope. Though it did take a painfully long time for me to receive the account election form from link so I'm not surprised

[dingoNZ]

Nope. Though it did take a painfully long time for me to receive the account election form from link so I'm not surprised

Do it online, it is effective immediately

[Okebw]

Do it online, it is effective immediately

I've done so now. However although that's done and I filled in the form they sent me it has apparently already been dispatched via cheque so I should get it some time this week

[dingoNZ]

I've done so now. However although that's done and I filled in the form they sent me it has apparently already been dispatched via cheque so I should get it some time this week


This happened to me when I sold my GTK shares, for reason this was specified be be paid via cheque rather than DC... I assume its to do with getting the shares via IPO. Frustrating though, hope it doesn't take too long for you!

I'll buy using my proceeds to buy more AIR today :)

[Hoop]

nope, Will call ASB and check it out

New Guy
It sounds like Link has no bank info in your account to transfer your Div to....In that case the DIV cheque will be sent via snail mail

To check out and update your Link account:
1...Go to link website https://investorcentre.linkmarketservices.co.nz/Login.aspx/Login
2...Click on Investor Services
3...On right hand side in the Investor Centre section click on Investor & Employee login
4...If you haven't registered do so here to get usename and password.(this info is sent to your nominated email address)
5...Login check your info and drop down from payments and Tax the update payment instructions box and check which bank account it's going to (if any)

Cheers
Hoop

[vin]

Received my divvy today by snail mail.

Contemplating buying in again..

[Master98]

Received my divvy today by snail mail.

Contemplating buying in again..
I re-invested my divvy Yesterday, happy to hold in medium term.

[Okebw]

Mine just turned up! Rather overweight on AIR so I'm thinking GNE before the record date/before people drive down the forecast yield

[dingoNZ]

Dividend reinvested, very happy. Looking forward to their next update

[Beagle]

August operating stat's are out and I am happy with them in light of geopolitical turmoil in the world and the underlying potential threat that Ebola has to somewhat, (at least at a subliminal level), dampen down travel demand. I think these are solid numbers.
https://www.nzx.com/companies/AIR/announcements/255777

[Master98]

August operating stat's are out and I am happy with them in light of geopolitical turmoil in the world and the underlying potential threat that Ebola has to somewhat, (at least at a subliminal level), dampen down travel demand. I think these are solid numbers.
https://www.nzx.com/companies/AIR/announcements/255777

In this world always something happened here or these, we have to live with it, happy to hold and we are all well positioned.

[brend]

Div received...not big enough to bother buying more shares but reinvested by paying for airfares to Shanghai :)

Looking forward to comments from the shareholders meeting.

The second dreamliner not too far away

http://australianaviation.com.au/2014/09/air-nzs-second-787-in-flight-testing/

[Beagle]

Looks like AIR has successfully found a new home for the last of its thirsty 747-400's whilst other airlines haven't managed their exit's so well.
http://australianaviation.com.au/2014/09/air-nz-gets-last-747-400-ready-for-new-owners/
I understand this aircraft has 68,000 hours flight time.

Air N.Z. to mark 75th anniversary in 2015 with retrospective exhibition at Te Papa opening 20 December 2014.
http://australianaviation.com.au/2014/07/air-new-zealand-to-mark-75th-anniversary-with-te-papa-exhibition/

[theace]

Anyone attend the meeting? (and have any observations to share?)

[brend]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11334198

share price down because of this?

[forest]

Anyone attend the meeting? (and have any observations to share?)

Every now and then you find a company which manages to do well in a difficult industry.
Air has had very difficult times in its history, it seems to me they have learned their lesson and are on the way to surprise their share holders pleasantly. Have a read if you haven't yet of the recently released annual shareholder review. A very positive review and there is every change that under Christopher Luxon leadership we will see results in the right direction in my view.

http://www.airnewzealand.co.nz/assets/PDFs/2014-annual-shareholder-review.pdf

[Beagle]

Its was a real pleasure to travel down to Chch with Forest, attend the Air AGM and meet up with our southern friends afterwards at the Brewers arms. A big thank you to Percy for his very kind assistance with transport, thanks mate.
The link Forest has provided contains all the information that's necessary to gain a good understanding of where AIR is at.
Management at the AGM reiterated their confidence that based on current year trading to date and forward bookings that earnings growth would continue in the current financial year.
I think we can look forward to a 2015 earnings guidance around the same time as they provided 2014 guidance last year.
Forest and I had a good chance to discuss the airline's situation after the meeting with Chris Luxon and I think its fair to say that we both came away very comfortable with where Air is at with its growth plans and with Mr Luxon's leadership. He is clearly highly energized and charismatic and his enthusiasm for the airline was obvious. He appears to have excellent leadership skills, (essential when you're in change of motivating a work force of 11,000 people), seemed very intelligent and highly articulate and had a way of connecting with people that put them as ease very quickly. I found him very likeable.

Turning to the new Dreamliner's operational performance, he confirmed it's performing right up to its expected operational expectations and fuel burn was slightly more efficient than expected.
As mentioned previously, this is incredibly important because with 10 coming, (2 already here and another one before Xmas) its profoundly important that this new aircraft type design meets its specifications.
He advised initial passenger feedback had been very positive. When asked if AIR would be considering exercising the further 8 options it had on the 787-9, without giving the game away Chris said I think you'll be seeing a lot more of the Dreamliner...read into that what you will.

With Air's strong financial position, improving product offering and strong cash flow and with AIR trading on very cheap fundamentals with excellent growth prospects and a high fully imputed dividend yield, I think its fair to say shareholders are very well positioned :)

[jamiec26]

Thanks for the great feedback Rodger!

[jamiec26]

Thanks for the great feedback Rodger!

[Leftfield]

With Air's strong financial position, improving product offering and strong cash flow and with AIR trading on very cheap fundamentals with excellent growth prospects and a high fully imputed dividend yield, I think its fair to say shareholders are very well positioned :)

As a holder I greatly appreciate your input Roger... certainly helps to keep the 'faith'.

[Beagle]

You're most welcome guys. Forest bought some more straight after the meeting which speaks for itself, (opps was I allowed to say that mate ?).

[Marilyn Munroe]

Any mention of the cash burn by Virgin(Under arm bowlers division) and what Cullen Airlines was going to do about it at the meeting?

Boop boop de do
Marilyn

[Beagle]

Any mention of the cash burn by Virgin(Under arm bowlers division) and what Cullen Airlines was going to do about it at the meeting?

Boop boop de do
Marilyn

Yes, Forest and I discussed the Virgin situation with Chris and as you'll know he is a director on the board. He advised good progress is being made on capturing corporate market share from Qantas and while unable to give any indication on financial guidance in regard to VAH's situation for 2015, he seemed very confident about their medium term outlook.

[Robomo]

Thanks for all your comments Roger, much appreciated.
I thought Rob Fife would be a hard act to follow but I have been very impressed by Chris Luxon, he has really got AirNZ humming. Just hope he can do the same with Virgin.

[Beagle]

I see airline stocks took a bit of a hit on the NYSE overnight with for example Delta down 3.5%. I've been trying to avoid the E word but I guess we should get it out in the open and have some discussion about it.
The experts are saying the single case of Ebola that's presently arrived into America via a passenger travelling from Africa is isolated and any close association he had with individuals between when he first become infectious and being admitted, is a situation that's under control because those people are under close watch. But questions remain to some extent. If America is so primed and on alert for Ebola as they claim, how come the patient was initially turned away from the hospital given that they should have asked if he'd recently travelled to Africa ?

I think Ebola is the only cloud on the horizon for AIR and its already factored into the present price which is very cheap on a fundamental basis. How much of a potential risk this poses to airlines in general and AIR which doesn't fly into Africa is incredibly difficult to ascertain with even a remote degree of reliability. I didn't bring up the E word with C.L. other day...as I don't think he or anyone else really knows how this thing will play out.
I know there's major initiatives around extra funding for a number of pharma companies so a vaccine can be fast tracked. Ebola doesn't appear to have affected AIR's forward bookings at this stage as they stated their confidence based on trading to date and forward bookings but I think Air is great value because of the unknown future effect the Ebola crisis could have in the long term on people's propensity to be risk averse and avoid unnecessary air travel.

Hopefully what looks like a very distant storm cloud will dissipate as world health organisations take serious measure to contain this disease. Anyway, someone had to table this as a relevant subject matter so I thought seeing as I'd outlined all the positives I had some sort of obligation to also outline my one concern. I don't lose sleep over it but I think like most people I'm watching developments in this area closely and I am sure AIR's management are too.

[winner69]

Our Chief Doctor said on the radio this morning 'Nobody has caught Ebola from sitting next to somebody on a plane'

And he said it not very infectious anyway

And you be right Roger - special isolation unit in Auckland and he has ordered a couple of Isopods in case he has to transport any suspected cases

[Zaphod]

I think Ebola is the only cloud on the horizon for AIR and its already factored into the present price which is very cheap on a fundamental basis.

What's your take on the effect of the current exchange rate reduction on underlying earnings? There's been a lot of talk recently by the RB, the PM and other similarly suited qualified acronyms about a "goldilocks" level of USD$0.65. That's a fair fall from current levels and below (if memory serves me correctly) the financial models many on here have been using to derive a fair value SP.

[Zaphod]

While I haven't given exchange rate impacts too much thought in general , I do note that the effects on AIR's patronage will largely cancel out. This is because a lower exchange rate makes it more expensive for kiwis to travel overseas, but cheaper for international tourists to come here. Hence, from a volume perspective, AIR has the benefit of a semi-natural hedge already in place.

Yes, agreed. That's a good point.

My main concern is around the impact to the cost of large ticket items such as fuel and the payment for new aircraft deliveries.

We're starting to see a concerted effort to reduce the exchange rate quite significantly.

[Beagle]

What's your take on the effect of the current exchange rate reduction on underlying earnings? There's been a lot of talk recently by the RB, the PM and other similarly suited qualified acronyms about a "goldilocks" level of USD$0.65. That's a fair fall from current levels and below (if memory serves me correctly) the financial models many on here have been using to derive a fair value SP.

Thanks for asking that. Forest and I had a good chat with CL after the meeting about that and it was also covered in the meeting during question time. Firstly bang on half their sales are from New Zealanders and half overseas so there's a natural hedge there and its a bigger hedge than it first appears as a lot of their costs are in $N.Z. AIR also has a forex hedging policy and they're well hedged this year at circa 83 cents. Chris explained that they don't generally try and make calls beyond a year on where the currency is going, (I guess without actually saying it he's alluding to the fact that they're in the airline game not the forex game), but rather, they try and buy themselves time to be adapt to a changing environment and back themselves to be quicker on their feet than some of their competitors to changing medium term trends. He implied to Forest and I that they don't want to have to be in a position where they have to explain to shareholders why they took a big position on currency one way or the other that turned to custard.

Its perhaps worth noting that staff and fuel costs make up roughly 25% of gross sales each, (total 50%) and obviously only fuel costs are currency sensitive. Not only do they hedge currency but of course you'll be aware they have an active fuel hedging program. A lot of their costs other than the (circa $1.2b IIRC) of wages are in $N.Z and given half their sales emanate from offshore and taking into account their hedging policy regarding fuel and currency I'm comfortable. That said its nice they go the first two Dreamliner's online when the currency was high. Chris also said in relation to the currency, they're currently experiencing lower fuel costs which is balancing the currency out and thought the two would offset and be earnings neutral for 2015.

He also mentioned in the meeting they have considerable financial flexibility being one of only four international airlines with an investment grade rating as to finance options regarding finance v operating lease v ownership of aircraft and went on to say they had a bias towards ownership of the new dreamliners. I guess it goes without saying there is some risk around the dollar in relation to future capex.

John Key may get his wish but beef is incredibly strong and will provide some buffer against the weak dairy sector.

Hopefully Modandm will add his thoughts to this matter in due course.

[Jaa]

The announcement of China Eastern starting seasonal flights from their hub of Shanghai to Auckland is not good news. The potential China market is large enough for multiple players but I am not sure how Air NZ will go long term without a strategic alliance like which they have with Cathay Pacific & Singapore Airlines.

Also, Qantas is refocussing on the US market which is the one international sector it dominates. http://blogs.crikey.com.au/planetalking/2014/09/29/qantas-a380s-dfw-syd-could-open-competing-us-routes/

Air NZ has a monopoly on NZ -> US flights and significant PAX that fly Australia -> Auckland -> LAX/SFO/VYR. This works really well for people flying from Adelaide, Brisbane and Perth who get a short layover to rest their legs in Auckland and a shorter flight segment to the US. It also works very well for anyone with San Francisco or Vancouver as their departure or destination as Qantas and Virgin Australia do not fly to either. These PAX also help Air NZ on the trans tasman.

The last 3 times I have flown either SFO or LAX to Auckland the planes have been packed (99% capacity) with maybe a third using Auckland as a layover on the way to or from Australia. If Qantas flies to any new US destinations it will hurt Air NZ.

Thus while the US is a goldmine for Air NZ, which is putting more capacity into it (triple daily to LAX!!), can it last?

[Beagle]

Big difference in the calibre of the product that's on offer between various airlines makes quite a point of differentiation as Forest and I discovered with Jetstar. CL also told the meeting they recently acquired two brand new 777-300's and said they're an excellent aircraft for the sort of longer flight op's AIR does.

After dinner last night I read the story of Goldilocks and the three bears to my granddaughter, (I do an excellent job of impersonating a gruff large daddy bear with a deep loud voice lol), anyway later on I got to thinking about John Key's so called Goldilocks exchange rate level.
Here's an interesting take on this by Gareth Morgan.
http://www.interest.co.nz/opinion/72235/gareth-morgan-explains-why-john-key-and-graeme-wheeler-are-unlikely-very-effective-get

[forest]

Jaa, profit margins are small in this industry.

Remember Quantas profit margins overall are negative the more they fly the more they loose.

AIR profit margins are positive and getting better. It might take a long time before AIR get serious competition.

[Jaa]

Remember Quantas profit margins overall are negative the more they fly the more they loose.

Overall they are negative but I bet Qantas profit margins are positive for their US routes.

[forest]

Overall they are negative but I bet Qantas profit margins are positive for their US routes.

I think you right but that can still leave profit for AIR on the US route.

[Jaa]

I think you right but that can still leave profit for AIR on the US route.

Maybe but I consider the US routes and their trans tasman feeders to be earning Air NZ above normal levels of profit. Such above normal levels attract competition.

[Beagle]

C.L. commented that people stepping off their Perth flights were saying they were felling in much better nick when flown on the Dreamliner than previous generation aircraft.
Some are reported in Australian Aviation magazine as saying they'll never fly an old tech airliner again. Imagine how much competitive advantage Air would have with a fleet of 18 Dreamliners all ordered ages ago in a bulk discounted deal when they used to cost a lot less :D Meanwhile over at the handicapped and cash strapped Kangaroo airline they've had to defer deliveries of their dreamliners till 2020 due to lack of capital resources, (read crappy management and the Australian unions have them by the balls and always will).
Who wants to fly long haul in an old tech airliner with harsh cabin altitude and super dry humidity and stale air ? Its not just about ticket price.

[slimwin]

It is for about 200 of the pax Roger.

[tricha]

Jaa, profit margins are small in this industry.

Remember Quantas profit margins overall are negative the more they fly the more they loose.

AIR profit margins are positive and getting better. It might take a long time before AIR get serious competition.

AIR profits are because they screw the average Kiwi:mad ;: and eliminate the average competitor through, unfair practices, backed by the NZ govt.

Ask Origin Pacific and others:confused:

[modandm]

I don't want to go into too much detail but the declining NZD is quite bad for AIR. No things don't cancel themselves out sorry. As a rough guide, 1c change in NZD USD = 1c change in normalised EPS. So from 30c based on 82c we are looking more like 26c now - though hedging will shield us this year. Still growth but...

Re China eastern - bad news, but not hugely significant in the scheme of a network.

Re Qantas, US competition on trans-pac, I don't see anything has changed. Yes Qantas has gone A380 to DFW, so what. Capacity increases are in line with demand. Regarding the Aussie feed to NZ trans-pac services this is not as significant as some would have you think. My impression is since Qantas pulled off AKL-LAX, AIR has been less aggressive in poaching Aussie customers (which are lower yielding anyway). You could call it a case of the two carriers playing nice. No signs of US carriers entering, its all gravy here.

The worry is USD strength for me - a clear negative. Can't see 65c though, 75c maybe. Still like the stock, haven't sold, just less upside...

-mod

[Beagle]

AIR profits are because they screw the average Kiwi:mad ;: and eliminate the average competitor through, unfair practices, backed by the NZ govt.

Ask Origin Pacific and others:confused:

C.L. defended regional prices in the shareholders meeting. He said they were making less money from their regional network than they were 5 years ago and that the regions were extremely well served in N.Z. with most towns over 20,000 population well served with regional flights whereas in many other countries they aren't.
He went on to say that AIR's regional prices were amongst the cheapest in the world, I believe from memory he claimed they were the cheapest, followed by Australia which on a regional mileage basis were 29% dearer.
He left me in no doubt that he has a wide range of evidence to back up his claims. He continued, fact is many of the world's aniline's wouldn't even bother running 19 seat aircraft to small regional towns, its very hard to make the economics work, (you still have to pay landing fees, airways charges and other charges and can only amortise them over a small 19 seat aircraft that at times might only have a few passengers on it !! e.g. (A friend of mine flew Nelson-Wellington the other day and there were only 2 people on the aircraft, still have to pay Wellington's exorbitant landing charges).

Yes, you can expect AIR to defend their patch against new entrants, why wouldn't they ?

Living in the regions confers many advantages for people, not the least of which is relatively cheap housing and the ability to get anywhere within their local town within a few minutes.
While a young couple living in Auckland may be able to enjoy inexpensive trips to major cities around N.Z. ask them about trying to save up for an average house in Auckland at $700,000 or about the two hours they spend every day commuting to their jobs and back and the roads being congested even on the weekends. Kind of puts the advantage they have in terms of cheaper airfares into perspective doesn't it !!
I think some people living in the regions need to simply accept that there's the odd disadvantage in doing so and one of them being more expensive air fares on a relative basis.
If there was so much money to be made on a consistent basis Jetstar would be flying the smaller towns then wouldn't they !!

As an example IIRC some Wanganui residents were recently bemoaning the withdrawal of air service to Wellington. Air claimed it was simply uneconomic to fly such a short sector and that residents hadn't supported it. You can't have it both ways. They either price short regional services at a level that gives them a reasonable return on the aircraft employed and people use it, or they lose it and have to use their car instead and charter their own flights for emergencies. I am sorry but the fact of the matter is AIR are running a business and shareholders are not here to grant welfare to small regional towns.

I see overnight the American airlines are up strongly, shareholders seem to be realising that with oil at a relatively low point and heading lower Airlines have the opportunity to lock in lower fuel prices than what's been the prevailing norm in recent years.

[tricha]

[QUOTE=forest;509718]Jaa, profit margins are small in this industry.

Remember Quantas profit margins overall are negative the more they fly the more they loose.

AIR profit margins are positive and getting better. It might take a long time before AIR get serious competition.

It can last as long as it is a state backed " Cartel " and it is allowed to have a monolopy over it competition.
It is a disgusting organisation, govt supported that screws the average Kiwi, by killing off any completion by lowering the price on that area, till they kill them off.

It needs to be split like TeleCON

A bit like the inter islander, without the Bluebridge, can you imagine the cost of getting across the ditch?
I take it the railways run it at a loss to remain in unfair completion :confused:

[Beagle]

I am sorry but unless you can back your highly emotional claims with evidence that they're outrageous relative to other airlines in other countries providing similar services to small regions then most people will view your statements as nothing more than having a baseless agenda and / or showing a very limited understanding of the operational costs an airline faces. Perhaps go away and do some research and provide some supporting evidence then people might take you seriously. Ever heard of the concept of using your car if you find short regional airfares so morally offensive as it appears you do ?

[tricha]

I am sorry but unless you can back your highly emotional claims with evidence that they're outrageous relative to other airlines in other countries providing similar services to small regions then most people will view your statements as nothing more than having a baseless agenda and / or showing a very limited understanding of the operational costs an airline faces. Perhaps go away and do some research and provide some supporting evidence then people might take you seriously. Ever heard of the concept of using your car if you find short regional airfares so morally offensive as it appears you do ?

We used to have Origin Pacific here, unfortunately the govt backed "cartel" Air NZ screwd them over by under cutting the fares.
now Air fares are 3 times the price to go to Dorkland. Remember we the tax payer bailed Air NZ out only to have them screw us over, by unfairly taking out any completion.

Shame on them.

Flight cost causes outrage
TRACY NEAL
Last updated 12:00 23/08/2014






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A Nelson woman wants to see greater competition on air services between here and Dunedin, after forking out $1352 for return airfares for herself and her husband to fly to a funeral.


Helen Blaikie expressed her dismay over regional airfares to Air New Zealand, after the last-minute booking to travel to a funeral last month cost them the small fortune.


"We live in Nelson and feel that regional airfares are a ridiculous price, especially when made at a late stage, such as for a funeral.


"Unfortunately we can never plan these events and book airfares ahead," she said.


The cost for the return fares with just carry-on bags was $1352 plus $40 [optional] insurance for the pair, which Blaikie considered "outrageous".


The pair moved to Nelson from Dunedin nine years ago and were aware of the challenges of getting to and from the southern city. Her husband also travelled the route fairly regularly on business.


Blaikie said that efforts to grow tourism in each area were stifled by the high cost of air travel.


"It's just a mission to get there [from Nelson]. There's one good flight that leaves Nelson at 10am and there's only a 20-minute stopover in Christchurch."


There are about 19 options for flights from Nelson to Dunedin each week, ranging from $295 one way for a seat-only fare [plus carry-on bag] to $446 one way for a flexifare.


There is no direct service from Nelson to Dunedin, and flights connect through Christchurch or Wellington. The longest trip, including the stopover, is 6 hours and 30 minutes and the shortest is 2 hours and 25 minutes.


The transit through Wellington or Christchurch was also at the mercy of weather, said Blaikie, who wondered why there could not be at least one direct service a week.


Air New Zealand expressed its sympathies to Blaikie for the circumstances around the need to travel to Dunedin for a funeral, and explained it offered compassionate fares to immediate family members.


Unfortunately, those fares were not available to extended family or close friends, which was a decision made around what the airline could afford to subsidise, and the documentation that could be provided to prove the relationship.


Air New Zealand also said it was the only airline willing to offer the Nelson-Dunedin service, and needed to charge prices accordingly to "make sure it could maintain Nelson as one of its destinations".


Blaikie said she understood the commercial realities facing airlines, but disagreed with Air New Zealand's response it was the only airline willing to offer the air service, considering its past tactics when other airlines have started competing with it.


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"Other airlines over the years have attempted to work from here and have eventually been squeezed out when you conveniently reduced your fares or changed destinations to suit," Blaikie wrote in an email to Air New Zealand.


Air New Zealand said it tried to keep fares "as low as it could".


Factors such as the size of the aircraft and the costs around operating a few flights a day influenced prices.


Flying between two larger airports was going to be more cost-effective for it, and therefore it could keep fares lower.


Air New Zealand said it released fares about 350 days before departure, and offered a range of discounted airfares.


As the plane started to fill up, the fare increased.


Air New Zealand declined to comment on whether the Nelson-Dunedin service was profitable, or worthwhile, or what the average weekly passenger loadings were.


Communications spokeswoman Emma Field said that information was commercially sensitive.


* Comments on this story are now closed.


- The Nelson Mail








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[Beagle]

Well there are a range of alternatives. First of all it is quite obviously more than reasonable to do the drive in about a day and a half. (within a single 24 hour period if you're keen and sharing the driving) or drive to Picton and catch the ferry and then they'd get a main trunk airfare from Wellington to Dunedin. Simply put, you can't make the implied claim they're being extorted as there are alternatives.

The same couple are probably enjoying a short 5 minute drive, (almost free it costs so little petrol) to wherever they need to go in Nelson 365 days a year, while the aforementioned young couple in Auckland might be paying $75 each per week in commuting / parking costs just to get to work and back as well as 10 hours a week doing it. (That's $3,900 each or a total of $7,800 every year in total).

The Govt have done well out of their bail-out of AIR many years ago. For example they just got a $91.45m dividend from AIR, much needed money with the dairy sector now so weak and much of this goes back into the regions in benefits and superannuation. Airlines should never be asked to be a benefit system to benefit one set of customers over another.

Its called human nature. Everyone is keen to bleat like a lamb lost from its mother when they feel they're hard done by. Intelligent / rational people take steps to mitigate high costs whenever they can and realise bleating is a fruitless exercise.

If the couple were so offended by the price they should have spent many hours in their car to alleviate the problem. Remember lots of people in Auckland are spending circa 10 hours every single week in their cars commuting. Is it such a hardship for that couple to spend a bit of time in their car once in a blue moon when they have to travel at reasonably short notice. You generally get at least a couple of days notice of a funeral.

Regarding the price to get to "Dorkland" as you so irrationally put it, AIR have frequent specials on grabaseat at $65 each way to Auckland, what's so unreasonable about that ?

Most intelligent people would be more than happy to celebrate the many positive attributes of living in sunny Nelson rather than wasting time bemoaning the odd disadvantage like expensive flights when once in a blue moon they have to travel at short notice and are too lazy to take steps to mitigate the cost.