AIR - Air NZ.

[stoploss]

Interestingly that broker valued VAH at half their present market price to arrive at $2.64 which was also before the collapse in oil prices. I'm not sure that taking such an aggressive approach to discounting the strategic value of VAH is appropriate given, a) The aforementioned dramatic drop in oil prices, b) The fact that VAH recently announced at the ASM that they're currently trading profitably and again this was before the Opec discord, c) The strategic route expansion opportunities the VAH shareholding brings to AIR, d) VAH are already working their rationalisation of routes and fleet with their yet to be finalised takeover of the 40% of Tiger they didn't already own for $1.
I reckon it's worth the face value they're trading at on the (ASX 41 cents) so that takes the fair value to $2.85 BEFORE oil prices fell off the face of a cliff.

Roger how much of their aviation gas requirements do they hedge the price on and how far forward ?

[RTM]

Air New Zealand holders may be interested in this.

https://www.anzsecurities.co.nz/DirectTrade/dynamic/announcement.aspx?id=3763420

Cheers, RTM

[Marilyn Munroe]

Roger how much of their aviation gas requirements do they hedge the price on and how far forward ?

Excuse me for barging in on Roger.

Cullen Airlines fuel hedging is disclosed on their web site;

http://www.airnewzealand.co.nz/fuel-hedging-announcements


Boop boop de do
Marilyn

[Master98]

Air NZ crew's boozy AB flight investigatedhttp://www.stuff.co.nz/travel/news/63683197/Air-NZ-crews-boozy-AB-flight-investigated

Lucky this time is not "drink and drive", but who knows next time will not be.

[winner69]

Air NZ crew's boozy AB flight investigatedhttp://www.stuff.co.nz/travel/news/63683197/Air-NZ-crews-boozy-AB-flight-investigated

Lucky this time is not "drink and drive", but who knows next time will not be.

They say that alcohol is the root of all evil don't they master

Ban it on planes I say ...at least it would stop all this drinking and rooting by their staff, and some high flying celebs.

What happened to the Dreamliner that got hit by lightning ....out of action is it?

[mikeybycrikey]

What happened to the Dreamliner that got hit by lightning ....out of action is it?

Seems like it arrived back in NZ and is being checked out by Air NZ engineering staff.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11366816

It's unclear from the article when it will be back flying again.

[unhuman]

Seems like it arrived back in NZ and is being checked out by Air NZ engineering staff.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11366816

It's unclear from the article when it will be back flying again.

It's already back flying:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11367043

[Beagle]

Oil rout continues at pace
http://www.cnbc.com/id/102225843
Qantas up another 5% last time I checked a few minutes ago. Those old kangaroo planes must be pretty thirsty or AIR SP reaction a bit under-done or some combination thereof.

Welcome to the forum unhuman and thanks for the status update on the affected plane. Good first post :)

[Beagle]

http://tvnz.co.nz/national-news/its-performance-extraordinary-air-nz-named-world-s-best-airline-again-6184628

[Robomo]

Interesting and informative article about the 787 and how they are performing in actual airline service, three years after delivery. Generally airlines seem to be happy with them, apart from the early glitches. Depending what measures you use and what planes are being replaced airlines are getting up to 27% savings on fuel, however up to 20% cost saving seems to be about the average on a per passenger basis.

The article is about the 787-8 and from what I hear the results from the 787-9 are slightly better. The reliability issues seem to be mostly fixed so Air New Zealand should be happy with the 787-9.

AirNZ have 10 787s on order and 10 options. I'm picking that they will take up all those options to replace the 777-200 aircraft by 2020 - there was some AirNZ advice a while back that the 777-200 were still good until about 2020.

http://www.flightglobal.com/news/articles/analysis-after-three-years-in-service-how-is-787-performing-405814/

[brend]

Interesting and informative article about the 787 and how they are performing in actual airline service, three years after delivery. Generally airlines seem to be happy with them, apart from the early glitches. Depending what measures you use and what planes are being replaced airlines are getting up to 27% savings on fuel, however up to 20% cost saving seems to be about the average on a per passenger basis.

The article is about the 787-8 and from what I hear the results from the 787-9 are slightly better. The reliability issues seem to be mostly fixed so Air New Zealand should be happy with the 787-9.

AirNZ have 10 787s on order and 10 options. I'm picking that they will take up all those options to replace the 777-200 aircraft by 2020 - there was some AirNZ advice a while back that the 777-200 were still good until about 2020.

http://www.flightglobal.com/news/articles/analysis-after-three-years-in-service-how-is-787-performing-405814/

They wouldn't replace 777-200's with 787s. The 777 fleet is used more in the North America market where their business and premium economy products are able to attract a higher margin when compared to Asia. Sources say they are either looking at 777X or airbus 350.

http://www.ausbt.com.au/air-new-zealand-considers-boeing-777x-vs-airbus-a350

[samdaman]

Just a small question. Does anyone know when the interim results are due? Must be soon?

[dingoNZ]

2014 Financial Year


27 February 2014
2014 Interim Results Announcement


27 August 2014
2014 Annual Results Announcement


30 September 2014
Annual Shareholders' Meeting




2015 ones will be in Feb

[Beagle]

Interesting and informative article about the 787 and how they are performing in actual airline service, three years after delivery. Generally airlines seem to be happy with them, apart from the early glitches. Depending what measures you use and what planes are being replaced airlines are getting up to 27% savings on fuel, however up to 20% cost saving seems to be about the average on a per passenger basis.

The article is about the 787-8 and from what I hear the results from the 787-9 are slightly better. The reliability issues seem to be mostly fixed so Air New Zealand should be happy with the 787-9.

AirNZ have 10 787s on order and 10 options. I'm picking that they will take up all those options to replace the 777-200 aircraft by 2020 - there was some AirNZ advice a while back that the 777-200 were still good until about 2020.

http://www.flightglobal.com/news/articles/analysis-after-three-years-in-service-how-is-787-performing-405814/

Thanks, made for a good read. I inferred the longer the sector the more the fuel saving relative to comparable type. Boeing has already gone on record saying AIR made a great customer for the 787-9 as they really push the operational limits of the aircraft and C.L. is on record saying fuel savings have slightly exceeded expectations.
Seems the third Dreamliner is already here or very close.
http://australianaviation.com.au/2014/11/air-nzs-third-787-9-spotted-at-paine-field/

Anyone flown on one of these new birds and like to give some feedback ?

[Marilyn Munroe]

like to give some feedback ?

Well yes I would; on the issue of runaway events in 787 batteries.

The American National Transportation Safety Board has recently released its report on the battery fire in a 787 at Boston Airport.

http://www.ntsb.gov/doclib/reports/2014/AIR1401.pdf

They were unable to establish the cause of this event. While there have been no recent occurances there is no assurance that it will not happen again. Boeing have made changes to mitigate the effects of such an event should it reoccur, but I wouln't want to be in one of these planes over the South Australian Bight if it did.


Boop boop de do
Marilyn

[Beagle]

http://www.airnewzealand.com/dreamlinerflyhappy/en#!/experience

[Robomo]

They wouldn't replace 777-200's with 787s. The 777 fleet is used more in the North America market where their business and premium economy products are able to attract a higher margin when compared to Asia. Sources say they are either looking at 777X or airbus 350.
[/URL]

The only North American destination for the 777-200 is Vancouver, all other routes are operated by the 777-300. the -200 is mostly used on Asian routes, which is what the 787-9 will be steadily taking over. The Vancouver market is growing and it would not surprise me to see the -300 eventualy used (the 747 was used until recently and that has a greater pax capacity than either the -200 or-300. It's hard to see the Airbus A350 being used, from a fleet commonality perspective the 777-XXX would make more sense.

[777]

The only North American destination for the 777-200 is Vancouver, all other routes are operated by the 777-300. the -200 is mostly used on Asian routes, which is what the 787-9 will be steadily taking over. The Vancouver market is growing and it would not surprise me to see the -300 eventualy used (the 747 was used until recently and that has a greater pax capacity than either the -200 or-300. It's hard to see the Airbus A350 being used, from a fleet commonality perspective the 777-XXX would make more sense.

There are not enough -300's to operate Vancouver. -200's are still used for the NZ3/4 LAX services and the SFO services when there are two services per day.

[Beagle]

I'm concerned about the 17.2 inch width of the new Dreamliner seats. Boeing designed the aircraft as a 280 pax machine and more or less stipulated a minimum seat width of 18 inches. Air squeezed just over 300 seats in there by compromising seat width and by using a very slim density designed seat. these are some of the very narrowest seats in the industry. I am sure your average 68 kilo Chineese tourist won't mind but I have it on good authority that a certain large build accountant (built like a front row All Black) got his ruler out the other day and after converting 17.2 inches to cm's measured this out on his office chair, placed some sticky notes to signify the dimensions and wasn't impressed at all. Said accountant is now looking at a vigorous walking programme to reduce butt size or looking at flying with the pretty Singapore girl who has some of the widest seats in economy at 19 inches in their new A380's.
I predict there's going to be some very disgruntled customers who are anything more than 2 standard deviations bigger than average size pax. Nobody likes being cooped-up far tighter than even a battery hen :eek2: lots of info here. www.seatguru.com

[Beagle]

PPPHHHHOOOAAAARRR Qantas SP on fire today up around 12% at A$2.36, nearly over-taken AIR's SP which is plainly ridiculous when you consider AIR's earnings record, more modern fleet and quite obviously better management. VAH starting to catch a bid too. American carriers on fire too on Friday last week. AIR SP's reaction to the massive oil price decline looking really under-done on a relative basis. Trading on a forward PE of about 8 even at $2.39. opportunity knocks for a big gain in 2015 ? Definitely one to hold for real as well as in the ST competition for 2015

[mikeybycrikey]

PPPHHHHOOOAAAARRR Qantas SP on fire today up around 12% at A$2.36, nearly over-taken AIR's SP which is plainly ridiculous when you consider AIR's earnings record, more modern fleet and quite obviously better management. VAH starting to catch a bid too. American carriers on fire too on Friday last week. AIR SP's reaction to the massive oil price decline looking really under-done on a relative basis. Trading on a forward PE of about 8 even at $2.39. opportunity knocks for a big gain in 2015 ? Definitely one to hold for real as well as in the ST competition for 2015

Considering that Qantas announced today that they expect their "underlying profit" for H1 to be about $300 million, which would (very, very roughly) translate to a PE of about 8.6 for that half, is the price jump in Qantas really unwarranted? It's a bit of a recovery story (although maybe the share price is getting ahead of the real-world recovery).

On the other hand, with Air NZ being well run for a number of years, I would say they are unlikely to significantly increase their profit any time soon. Passenger numbers aren't even really going up in any meaningful way and there is only so much efficiency you can wring out of the same number of passengers.

Also, the airline industry is risky and low margin. The quality of Air NZ's management doesn't change that but it does help mitigate it.

I think Air NZ is pretty fairly priced right now and Qantas is coming out of distressed-pricing. I might've actually bought into QAN at $1.37 if I had thought the SP was going to recover this quickly.

[Beagle]

Qantas, old fleet, high labour costs with ongoing union issues, facing massive capex to update their fleet, Australian economy overly dependent on minerals and a deteriorating manufacturing sector.
Qantas track record and AIR's...no comparison.
Not sure what hymm sheet your reading off regarding AIR being unlikely to increase profits anytime soon. Suggest you have a look at their most recent update.

[Schrodinger]

Qantas hardly flies anywhere these days. They do the bare minimum, such as Syd-Melb and Syd/Melb-LA/London. Its Jetstar that services the majority of routes now. They do all the flights to/from Asia for instance. Their staff are based overseas, and all their maintenance is outsourced offshore. Their cost base is low. Eventually Qantas will no longer exist, and Jetstar will fly everywhere. So instead of negotiating with unions or paying for old planes, they are simply (and quietly) retiring routes and planes and handing them off to Jetstar. Au Revoir Qantas.

KW don't you think there is a little political capital tied to Qantas and having them disappear/fold is not in the national interest? This was evident when the NZ Gov forked out $1B to bail out Air NZ...I cant see the Gov letting Qantas disappear.

[brend]

Two more dreamliners on order. 9 version

https://nzx.com/companies/AIR/announcements/258634

[Beagle]

Two different markets KW. Air aiming for full service, modern aircraft, Jetstar simply isn't in the same league. I believe AIR will eventually exercise all its remaining options on the Dreamliner and they'll have a fleet of 18 of these beautiful new fuel efficient aircraft. Once pax have experienced all the advantages of aircraft like these or the new A380's I believe a fairly significant percentage of customers will seek these type out in their future travel plans.
Like anything in life you get what you pay for and while its fair to say there will always be a certain number of pax who choose the cheapest, there's a good percentage who want a quality experience with their national airline and are prepared to pay a bit more for it.

Good to see all three new 787-9's scheduled for delivery this year are here and now earning their keep on the Japan and China routes.
The substantial extra cargo capacity will come in real handy for fresh commodity exports and they can carry a full payload of circa 15 tons of freight and full pax over 8,000 nm's my pilot friend tells me, (previously they had to juggle freight and cargo on some 767 routes depending on loading). There are grounds to believe VAH will now make a positive contribution to AIR's 2015 result.

[mikeybycrikey]

Not sure what hymm sheet your reading off regarding AIR being unlikely to increase profits anytime soon. Suggest you have a look at their most recent update.

I didn't say they weren't going to increase profit, I said they weren't going to significantly increase their profit. With falling fuel prices and more efficient aircraft, the profit is almost certainly going up.

However they're not growing their market. I looked at their latest market update and it told me "Revenue passenger kilometres (RPKs) were 0.8% higher" in October over the previous year. If I look back at 2009 vs 2014, revenue is up 1.2%. In 5 years. RPKs are also only up 3.5%. These are not significant increases.

EBIT/Revenue has gone from 1.7% in 2009 to 8.6% in 2014. There is only so much profit even AIR can get out of static revenue.

So, I'm pretty happy with my analysis there.

On the other hand, AIR also says "there had been an encouraging start to the year with solid forward bookings into the high season." So, maybe that indicates there will be some revenue growth. And the company is in a much better long-term position now then it was five years ago.

[Beagle]

Craigs have them on a 2015 Net profit before tax of $474m up 33% on 2014 and that was before Opec couldn't agree on output reductions and oil prices moved significantly lower.
That's pretty "significant" in my book for a company trading on such a modest multiple and is now probably quite conservative especially with VAH now in the black.

[h2so4]

If a company is not growing but is generating huge profits then the dividends will flow to its shareholders. Isn't that what AIR does?
I don't think I would base my case on no revenue growth. The idea of any business is to generate profits and manage its assets well.

[Beagle]

When I worked at Telstra, their corporate travel policy was that people had to fly whatever was the cheapest flight that was available that day. Whether that was on Qantas, Virgin or Jetstar was immaterial. I wonder how many other companies have similar corporate travel policies in order to save money. The leisure travel market is very price sensitive - thats why sites like Webjet, Expedia and SkyScanner exist - to root out the cheapest air fare possible. And for the ad hoc market, those of us who travel only because the airline put a "too good to refuse" offer in the market, there is no other consideration. I went to London and Tokyo for no other reason than there was a too good to pass up fare offer (Singapore Airlines for London and Jetstar for Tokyo) :t_up: You might not choose to fly anything other than AIR but it would be a mistake to assume that others feel the same way. Most people I know fly whatever is cheapest.

I'd suggest you mix mainly with younger people so its easy to form a slightly biased view of what "most people" want.
I am curious if you have flown Jetstar domestically ? When Forest and I, ("gulp", dare I admit this...flew Jetstar to the AIR ASM) mainly because scheduling suited better and gave more time for the dinner afterwards we were both distinctly unimpressed, I was shocked. Here's a typical review from seat guru from a lady that's only 5 ft 3 inches

AKL to Wellington - Worst flight ever like being squashed into a tiny coffin, i was almost hysterical with claustrophobia by the time we landed. I am only 5 foot 3 and my knees were jammed gainst the seat in front, with the back of it almost in my face, could not put my tray down at all. Had to sit sideways and stare out the window with loud music on headphones to try and keep calm. Total nightmare, go with Air NZ instead as their A320 planes have a pitch of 30-33 as opposed to the pathetic 29 on this awful plane.

My mum recently flew to Dunedin on Jetstar and she is about 5 ft 6, (I take after my Dad) and she found it really cramped too. Old planes crappy service and sardines in a can. Honestly I had some difficulty breathing on the flight back from Chch, whether that was the sardine tin super duper tight seat, the excess alcohol drunk before hand or my blood pressure getting up from both I'm not sure but my knees were crammed in so hard against the seat in front it was physically painful, (I'm 6 ft tall so God knows how anyone taller copes). Honestly....never again at any price. the service was almost non-existent and you had to pay for anything and I just decided to grin and bear it...I've had more comfortable and less painful experiences in a dentists chair. 29 inch pitch seats is an absolutely disgusting travesty on the concept of air travel.

I havn't flown Jetstar internationally and wouldn't. My good mate Peter is just back from a trip to Aussie and was flown Jetstar by the company he was hired by so perhaps you're suggestion that some Australian companies have a policy of cheapest is more pervasive in Australia ?

I'd be more than happy to fly Singapore Airlines or Emirates to London on their new A380's. Both top quality airlines with great planes and great service from what I hear.

[h2so4]

Tell any kiwi you fly Jetstar and be prepared for the backlash.:eek2:

[Beagle]

521416Haha. There is no denying that Jetstar are unbelievably awful LOL. But they are also significantly cheaper. So you tend to just suck it up and spend the flight dreaming about what you are going to spend all that extra cash on once you get there :-) AIR will find that its non-competitive routes get a lot more profitable, but they will face extra capacity on competitive routes that will drive down prices in the long run. I guess overall direction of the share price will depend on which routes are most profitable for AIR - domestic regional, domestic trunk or international.

See, that's it in a nutshell. I simply won't put up with unbelievably awful anymore no matter what the price advantage. I can however see your perspective and acknowledge for a lot of people its simply about the cheapest flight and nothing else matters but that's not the market AIR is in. Whatever happened to the concept that international air travel was special, an experience to be savoured and enjoyed, a special luxury and reward for one's hard work...even the illusion of this is nice to hang onto IMO. Jetstar's creaky old cramped sardine - flying bus torment is grossly oppressive and repugnant and so diametrically opposed to at least the illusion that international air travel is special that it wounds the soul and destroys the first and last part of one's holiday IMHO. Why travel third class when you don't have too !!

[andrewm]

I used to fly often between Auckland and Wellington (student) and would always pay upto 30% extra if needed to fly AIR NZ partially due to the budget nature of Jetstar but also in my 30+ flights over a few years I had 0 delayed AIR NZ flights and 5 or so delayed Jetstar ones. Twice my Jetstar flight was delayed extensively due to 'weather conditions' (didnt seem at all bad) when I watched the AIR NZ flight around that time depart and regreted choosing Jetstar. I also noticed (3 or 4 instances) Jetstar would close its baggage off bang on 30 minutes before departure whereas AIR NZ seemed to squeeze that late baggage check in traveller in and still leave on time.
I would find that if I booked far enough in advance the two airlines would be similar in price but as time got closer the AIR NZ one got much more expensive and sold out faster.
I recently booked some flights to Rarotonga and to the Gold coast and found AIR NZ to be miles cheaper than the competition.

[Poet]

Jetstar pi$$ed me off once big time with delays for no particular reason, and no compensation. Their attitude was, we're cheap so you shouldn't expect anything and should be grateful for what you get. When travelling these days, I don't even check their prices - so my choice is Air NZ on this day and time, or Air NZ on that day and time. I don't think I'm unusual in that attitude, if you can't get the basics right it doesn't really matter (to me at least) how cheap you are.

[Poet]

Also. I've got to say that I haven't travelled on the 787 but have done quite a few trips on the A380, and my observation is that the new gen aircraft are great from an airline point of view and from a shareholder point of view, but as a passenger, well meh! same old same old and the A380, having a circular fuselage, doesn't offer as good a view out of the windows, at least not from the top floor, as the old 747 or 777.

Maybe the cabin pressurisation and larger windows will offer better experience on the 787, but as I say, I haven't done that, so can't comment

[skid]

I think we have consensus here--Jetstar is awful--But AIR is trying hard to catch up with those 17''seats on its new already huge planes (even more seats than the maker recommends)--What were they thinking?

My 2 cents(on Jetstar)--who cares on the short flights--but avoid like the plague on the long haul

[Beagle]

Oil down 4% overnight. Brent $66 and change, WTI $63 for the front month January 2015 contract. Yesterday I checked the futures price for December 2015 Brent and it was trading at $73, so probably around $70 today so airlines can lock in tremendous fuel savings for the 2016 FY year already, if they choose to do so.


But AIR is trying hard to catch up with those 17''seats on its new already huge planes (even more seats than the maker recommends)--What were they thinking?

Even I would have to concede that I think the accountants had too much say in that decision :) 302 seats in a 787-9 when the manufacturer designed the plane for 280 means that effectively AIR has traded off much of the benefit of the Dreamliner from a customers perspective for seat mile cost savings. This looks like a strategy to match some of the lower cost airlines especially when viewed in the context of seat choice, i.e. seat only, seat plus bag, the works e.t.c. Most people won't mind as the pitch is okay but large people looking for comfortable long haul economy travel are probably better off on Singapore Airlines with their 19 inch width seats on A380's. www.seatguru.com is definitely a good place to visit for anyone contemplating long haul travel.
Is Air's premium economy with 19 inch width seats with 42 inch pitch effectively the new business class ?

What's the consensus updated view of analysts ? Consensus view is Outperform
http://www.reuters.com/finance/stocks/analyst?symbol=AIR.NZ
Scroll down towards the bottom of the page and you'll see that in the last month the consensus view of analysts for 2015 earnings has increased significantly from 22.63 cps to 26.44 cps. Highest analysts view is 31 cps translates on 1.117b shares to a whopping $346m profit after tax:t_up:

Oil price to remain weak for three years
http://www.interest.co.nz/personal-finance/73262/oil-price-remain-weak-3-years-helping-restrain-both-interest-rates-and-inflat

[h2so4]

I got 29.70 - hedges so I'm happy with that.:)

[brend]

Even I would have to concede that I think the accountants had too much say in that decision :) 302 seats in a 787-9 when the manufacturer designed the plane for 280 means that effectively AIR has traded off much of the benefit of the Dreamliner from a customers perspective for seat mile cost savings. This looks like a strategy to match some of the lower cost airlines especially when viewed in the context of seat choice, i.e. seat only, seat plus bag, the works e.t.c. Most people won't mind as the pitch is okay but large people looking for comfortable long haul economy travel are probably better off on Singapore Airlines with their 19 inch width seats on A380's. www.seatguru.com (http://www.seatguru.com) is definitely a good place to visit for anyone contemplating long haul travel.
Is Air's premium economy with 19 inch width seats with 42 inch pitch effectively the new business class ?



ANA have 395 seats on their 787-9's as most seats are economy. The seat width is wider though.

[Beagle]

ANA have 395 seats on their 787-9's as most seats are economy. The seat width is wider though.

WOW...that gives quite an insight as to how much room those lie flat business class seats take up in Air's configuration doesn't it and also gives insight into why business class airfares are priced where they are !!

[mikeybycrikey]

New Air NZ route to North America to be announced on Friday?

http://www.stuff.co.nz/travel/news/63986409/Air-NZ-expected-to-open-new-US-route

[Zaphod]

At least they muddied the waters with multiple possible destinations this time! The public knew about the YVR route about a year before it was confirmed.

[modandm]

At least they muddied the waters with multiple possible destinations this time! The public knew about the YVR route about a year before it was confirmed.

My confident prediction is it will be GRU - Sao Paulo Brazil staring 3x weekly in September 2015.

This route is viable now with the Singapore alliance, and with Avianca Brazil set to join Star mid 2015. The 787 is configured well for the leisure heavy traffic expected.

Future US routes are not needed urgently, but i do expect Houston to be announced sometime next year.

In other news the jet fuel price has moved down back to a $16 spread to Brent. It's now near $80 bbl... This puts my $100 USD bbl and 45-50c eps next year scenario into play, should things stay as they are. A couple of brokers have increased price targets after their economists decreased their oil price expectations. Several now have $2.80 targets, but they are still being too conservative on both revenue and fuel costs. Most are expecting brent to return to $80 by mid-late next year. I wouldn't even attempt to predict.

Somewhat teasingly Qantas has rallied hugely, on improving yields in Australia. This bodes well for VAH to return to profit and contribute to Air NZ's profits (could even do so this year!)

The stock is looking very compelling right now, so fingers crossed fuel stays down and positive trends continue.

mod

[iceman]

I hope you are right. The CEO is on record in recent days saying South America is noticably missing from the AIR map. LAN as the only carrier between NZ and SA desperately needs competition with their constantly full planes, average service and high prices.


My confident prediction is it will be GRU - Sao Paulo Brazil staring 3x weekly in September 2015.

This route is viable now with the Singapore alliance, and with Avianca Brazil set to join Star mid 2015. The 787 is configured well for the leisure heavy traffic expected.

Future US routes are not needed urgently, but i do expect Houston to be announced sometime next

mod

[GuessX]

but i do expect Houston to be announced sometime next year.


mod

Any reason you'd pick Houston over chicago?

I'd have thought the recent All Blacks tour to Chicago where AirNZ threw some extra flights on to be a good indicator of what they were trialing.

[dingoNZ]

Chicago is the most logical choice IMHO

[Beagle]

My confident prediction is it will be GRU - Sao Paulo Brazil staring 3x weekly in September 2015.

This route is viable now with the Singapore alliance, and with Avianca Brazil set to join Star mid 2015. The 787 is configured well for the leisure heavy traffic expected.

Future US routes are not needed urgently, but i do expect Houston to be announced sometime next year.

In other news the jet fuel price has moved down back to a $16 spread to Brent. It's now near $80 bbl... This puts my $100 USD bbl and 45-50c eps next year scenario into play, should things stay as they are. A couple of brokers have increased price targets after their economists decreased their oil price expectations. Several now have $2.80 targets, but they are still being too conservative on both revenue and fuel costs. Most are expecting brent to return to $80 by mid-late next year. I wouldn't even attempt to predict.
Somewhat teasingly Qantas has rallied hugely, on improving yields in Australia. This bodes well for VAH to return to profit and contribute to Air NZ's profits (could even do so this year!)

The stock is looking very compelling right now, so fingers crossed fuel stays down and positive trends continue.

mod

Good post. Brent crude futures for Dec 2015, (half way point of Air's 2016 year now under $70)
https://www.tradingfloor.com/futures/lcoz5
Perhaps you could input that into your model for 2016 and update us. I agree and see deep value in AIR notwithstanding its recent strong run.
Cheers.

[777]

Any reason you'd pick Houston over chicago?

I'd have thought the recent All Blacks tour to Chicago where AirNZ threw some extra flights on to be a good indicator of what they were trialing.

They only operated to Chicago because that was where the game was to be played.

[Beagle]

Yes KW and what did I tell ya ? Extract
The airlines will still be making more money. They forecast record net profit of $25 billion (NZ$32.43) next year - well above the $19.9 billion this year, the US$10.6 billion in 2013 and US$6.1 billion in 2012.

[Beagle]

Monthly operating stat's give a breakdown of the various regions for the month and YTD with comparisons to previous year if you want to do some research.

[modandm]

To answer KW's valid point.

1. Given the weakness in NZD USD, even if prices are flat in USD, yield will be up in NZD. To china tickets can't get much cheaper anyway

2. Air faces limited competition and doesn't need to lower prices. This is why its one of the best in the world. You can bet Qantas won't be dropping prices, and jetstar NZ is only at breakeven today so why would they. What routes have competition, next to zero. Of course they will say that they are, and even if they did 1-2% would be of no consequence given the fall in costs.

3. If price falls quantity demand rises - therefore a yield decline is likely to be more than offset by a volume increase taking total revenue higher.

4. If supernormal profits are being made (as I expect to be) then yes competition will be attracted, but for the small market of NZ that will take years to eventuate. On the highly competive routes like New-York London that might take weeks or months...

Your concern is well grounded, but its not an issue to worry about yet.

P:S - something like 80% of trans tasman traffic is Kiwi, and prob even higher on Air NZ flights... I don't worry about the ozzie consumer.

[Baa_Baa]

Morningstar rating 11/12 HOLD valuation $2.50

[h2so4]

Oh come on $3 at least Morningstar...... must be automated or something.

[h2so4]

......or KW had an imput.:)

[Beagle]

Morningstar rating 11/12 HOLD valuation $2.50

That settles it then, they know nothing. Its a strong buy right up to $3.00 and beyond.

[GuessX]

AirNZ holding a media conference at their head office this morning.

NZHerald speculating it's the USA route being announced with longer term strategy to get into South America (well apparently it's been updated as I typed tipping South America), Stuff reporting it's a new South America route.

http://www.stuff.co.nz/travel/news/64073364/Air-NZ-to-fly-South-American-route

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11372894
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11372895

[theace]

Buenos Aires confirmed .... http://www.stuff.co.nz/travel/news/64073364/Air-NZ-to-fly-to-Buenos-Aires

[Beagle]

Looks like a good expansion to me. Code sharing and avoiding going head to head with LAN on the Santiago route. All good sensible stuff.
I reckon some people underrate AIR's management ability and Kiwi's propensity to fly their own national airline. Its a Kiwi thing.

[h2so4]

Looks like a good expansion to me. Code sharing and avoiding going head to head with LAN on the Santiago route. All good sensible stuff.
I reckon some people underrate AIR's management ability and Kiwi's propensity to fly their own national airline. Its a Kiwi thing.

Very good move. What Kiwi wouldn't want to see the Allblacks play the Pumas live in Argentina flying AIR. Choice choice :t_up:

[Marilyn Munroe]

Buenos Aires confirmed .... http://www.stuff.co.nz/travel/news/64073364/Air-NZ-to-fly-to-Buenos-Aires

According to the article LAN Chile are going to replace their A340's on this route with 787's. The normal routing for Australasian flights to South America is to dive deep into the Southern Ocean. This is made possible by the four engine A340 complying with ETOPS rules. These rules specify how far in time any aircraft can fly beyond an airfield in case of an emergency. An A340 or 747 because it has four engines has a greater ETOPS range than a two engined aircraft like the 777 or 787.

I am curious how LAN Chile and Cullen Airlines will handle this issue.

Boop boop de do
Marilyn

PS. A340's while excellent aircraft are getting long in the tooth and in the words of one commentator are thirstier than an Irishman at a wake. Still given plumeting fuel prices Cullen Airlines could have leased some from their mates at Etihad to prove up the route

[Marilyn Munroe]

The normal routing for Australasian flights to South America is to dive deep into the Southern Ocean.

This site has a great circle route mapping tool to illustrate this concept;

http://www.gcmap.com/mapui?P=akl-eze

For a wow! view enter the Sydney - Buenos Aires route into the search box. SYD-EZE

Boop boop de do
Marilyn

[Beagle]

Good question luv. I believe ETOPS rules have been extended, must have been as Air are using a twin engined 777-200ER on the new route which I couldn't help notice on that site forms the shape of a very happy smile...a very positive sign for great things to come for AIR shareholders or a coincidence, you decide :)

Anyone else notice QAN SP's has overtaken AIR's :confused:...we live in a strange world.

[777]

According to the article LAN Chile are going to replace their A340's on this route with 787's. The normal routing for Australasian flights to South America is to dive deep into the Southern Ocean. This is made possible by the four engine A340 complying with ETOPS rules. These rules specify how far in time any aircraft can fly beyond an airfield in case of an emergency. An A340 or 747 because it has four engines has a greater ETOPS range than a two engined aircraft like the 777 or 787.

I am curious how LAN Chile and Cullen Airlines will handle this issue.



ETOPs rules apply equally to 4 engine ops and 2 engine ops due to do with cargo hold fire suppression times.

ETOPs 240 would be used requiring a more northerly route as shown on http://www.gcmap.com/mapui?P=akl-eze&MS=wls&DU=mi&E=240

[Robomo]

ETOPS for Boeing 787-9 and 777-200ER is 330 minutes (i.e. 5.5 hours). I can't think of any scheduled flight that would be more than 330 minutes away from an alternative airport.
FAA certification December 2011 (777-200) and 16 June 2014 (787)

[biker]

ETOPS for Boeing 787-9 and 777-200ER is 330 minutes (i.e. 5.5 hours). I can't think of any scheduled flight that would be more than 330 minutes away from an alternative airport.
FAA certification December 2011 (777-200) and 16 June 2014 (787)

I think AIR will use 330 min ETOPS and go South but will need to carry extra cargo fire extinguisher bottles to ensure fire suppression for 330 mins. No big deal.

[Beagle]

Front month oil contracts for January 2015 delivery still under huge pressure to the downside and importantly for airlines hedging programs Brent oil for delivery in December 15 is now only $67 and change !!
https://www.tradingfloor.com/futures/lcoz5 Time for Air management to lock in some of the substantial fall ?

[Zaphod]

Russia is making some noises about imposing suitably vague countermeasures should the USA impose additional sanctions, which could have a material affect on oil prices. Hopefully things are starting to cool down thought.

I also note that the NZ Herald is reporting another off-duty staffing incident. These all appear to be well handled by the company once things are brought to their attention, so I'm not concerned.

[Beagle]

Russia is making some noises about imposing suitably vague countermeasures should the USA impose additional sanctions, which could have a material affect on oil prices. Hopefully things are starting to cool down thought.

I also note that the NZ Herald is reporting another off-duty staffing incident. These all appear to be well handled by the company once things are brought to their attention, so I'm not concerned.

They don't need any more sanctions. The conspiracy theory that the Saudi's and Americans cooperated on the oil production front to really stick it to the Russians may have credibility. The rouble and Russian economy is in huge trouble with $60 oil. I wonder how they'll get on when it hits $50 ? Putin must be Pukin :) Principle's of natural justice are playing out very nicely.

[Beagle]

https://nzx.com/companies/AIR/announcements/258964

November Operating stat's are out. Solid demand and growth in demand RPK's and yield. Meanwhile oil prices continue their steep decline. Its all looking very positive :t_up:

P.S. Oil looks broken. December 2016 Brent futures now trading under $70. December 2015 just over $65
Even December 2017 futures only just over $72 http://www.barchart.com/quotes/futures/CBZ17

Cheap avaiation fuel looks like its here to stay for years :D

[Poet]

"Group-wide yields for the financial year to date were up 2.2% on the same period last year. Short Haul yields were up 2.2%, while Long Haul yields were up 1.2%. Removing the impact of foreign exchange, Group-wide yields were up 4.3%."

Would someone be able to help me by explaining the definition of yield
Is it revenue per passenger per kilometre?
TIA

[BFG]

Oil price stages a couple hours of rallying then gets slammed again in the NYMEX.

Enjoy sub-$50 AIR holders :)

[Beagle]

"Group-wide yields for the financial year to date were up 2.2% on the same period last year. Short Haul yields were up 2.2%, while Long Haul yields were up 1.2%. Removing the impact of foreign exchange, Group-wide yields were up 4.3%."

Would someone be able to help me by explaining the definition of yield
Is it revenue per passenger per kilometre?[/
TIA

Yep that's it. Yields going up while fuel price is getting slammed. That's the sort of Christmas recipe I find tasty :)

BFG Sure will. Real front month supply glut. Many parts of America and Canada already in the mid - late $40's per bbl. Nowhere to store the black stuff. I'd imagine the American's strategic petroleum reserve is already brimming right to the top.

[Zaphod]

They don't need any more sanctions. The conspiracy theory that the Saudi's and Americans cooperated on the oil production front to really stick it to the Russians may have credibility. The rouble and Russian economy is in huge trouble with $60 oil. I wonder how they'll get on when it hits $50 ? Putin must be Pukin :) Principle's of natural justice are playing out very nicely.

Yes, if it drops any further Russia could be at real risk of a recession, which could have some severe effects on the global economy.

Well done on the quip :) LOL

[Beagle]

Here comes that extra capacity :-) Jetstar announced 3 new routes today. Melbourne - Wellington, Sydney - Wellington, Cairns - Wellington. Flights start 30 March 2015.
Yep, $99 sale fares to Melbourne and you get a free shoehorn so even moderate sized people can squeeze themselves into the tiny coffin that is their seat.

[Robomo]

Yep, $99 sale fares to Melbourne and you get a free shoehorn so even moderate sized people can squeeze themselves into the tiny coffin that is their seat.

Nah, read the small print. $10 for the shoehorn, and it reduces your carryon from 10kg to 9.9kg. Jetstar don't give away anything.

[winner69]

Will need to have a good night out in Melbourne before returning home to Wellington .... departure 12.45am arriving 6am just in time to get to work ... nice

[Jaa]

Here comes that extra capacity :-) Jetstar announced 3 new routes today. Melbourne - Wellington, Sydney - Wellington, Cairns - Wellington. Flights start 30 March 2015.

This didn't sound right to me so I did some investigating and the Wellington - Sydney and Wellington - Cairns routes are both via Melbourne! So only one new route then.

Fiji Airways did announce a new Wellington - Nadi route the other day so I'll give you two.

In terms of capacity I am surprised that Air NZ now have 40 wide body services a week across the trans tasman. The Auckland as the hub of the south pacific strategy seems to be working well.

[Beagle]

Will need to have a good night out in Melbourne before returning home to Wellington .... departure 12.45am arriving 6am just in time to get to work ... nice

Yep, super nice... goes with the rest of their five star experience :lol: :lol: Hint to KW, just spend a bit more time working the market so you can afford a proper airline ticket, honestly those scummy old planes with their truly shocking 29 inch pitch sardine can seats, cranky old battle-axe hostesses that would rather be working for a proper airline, almost non existent service and the hours of the flight almost perfectly encapsulate the true essence of third class travel. Why lower yourself to that when you don't have too just to save a few measly bucks ?

[NZSilver]

I actually dont have a problem with their seat sizes (I'm short), require nothing from stewards other than to direct me off the plane in case of emergency, take my own inflight entertainment, and get pissed in the Qantas lounge beforehand so I don't care anyway (plus nick a bit of food/drink from there for later).

Haha tops, thats about how I travel by air - except Im tall so my knees get in the way.

[Beagle]

Fair enough KW. When I was younger I was into finding the cheapest as frankly I had too. I think its part of the natural course of life that you gradually become more discerning. The fact that you still remember the Air flight fondly speaks for itself.

Tim Clark president and CEO of Emirates opines on the future price of oil and where he sees fair value
http://www.cnbc.com/id/102275654

[theace]

On the up ...

[Beagle]

Yep, I think modandm must be out doing his Christmas shopping otherwise he's quietly knocking back a few favourite bevvies. Outlook for 2015 looks very bright :t_up:

P.S. Air New Zealand will celebrate the first trans-Tasman flight from Auckland to Sydney tonight with the launch of a special exhibition at Te Papa Museum in Wellington.
http://tvnz.co.nz/national-news/air-nz-celebrates-75-years-te-papa-exhibition-6208887

[ari]

https://www.youtube.com/watch?v=cuTkdF6wGI0

[Beagle]

https://www.youtube.com/watch?v=cuTkdF6wGI0

How sweet is that :) Those passengers will remember that wonderful experience for the rest of their lives. What a brilliant way to build brand loyalty :t_up:

[Beagle]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11379808

[slimwin]

Hm. For every good story theres a bad. I was at a BBQ over xmas where a group of Irish travellers had flown business to NZ on AIR. They were disappointed with the service and will go back to Emirates/Singapore for their next trips.

[Beagle]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11381823
AIR gears up for growth. (Note the revenue sharing deal to Singapore). Doesn't matter if shareholders want to try out Singapore's A380 service to sample that plane type, AIR still get half the revenue irrespective of which airline they fly.

[angrytoenail]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11381823
AIR gears up for growth. (Note the revenue sharing deal to Singapore). Doesn't matter if shareholders want to try out Singapore's A380 service to sample that plane type, AIR still get half the revenue irrespective of which airline they fly.

That's not quite how it works. Revenue will be allocated on several factors, the predominant of which is PAX count.

Source: worked on audits pertaining to airline alliances

[Beagle]

That's not quite how it works. Revenue will be allocated on several factors, the predominant of which is PAX count.

Source: worked on audits pertaining to airline alliances

Hi mate,

It would be good if you'd unpack what the other factors are to help all our understanding. I note in the article for example that the mix of seats is also a factor (economy vs other classes).
Chris Luxon said at the ASM last year that AIR was completely agnostic about which airline people chose to fly to Singapore as it didn't affect AIR's revenue share one way or the other.

[angrytoenail]

Hi mate,

It would be good if you'd unpack what the other factors are to help all our understanding. I note in the article for example that the mix of seats is also a factor (economy vs other classes).
Chris Luxon said at the ASM last year that AIR was completely agnostic about which airline people chose to fly to Singapore as it didn't affect AIR's revenue share one way or the other.
That's true, it's agnostic in that it doesn't matter what metal the passenger flies on, revenue is collected regardless of whether a passenger on an NZ ticketed flight actually flies on an Air NZ aircraft (versus an alliance/codeshare partner's flight). The actual revenue share formula is commercially sensitive, as I'm sure you can appreciate.

[KiwiGekko]

Meanwhile the Qantas SP continues to crank along already up around 8% this year and now with a higher SP than AIR.

[dingoNZ]

Their market cap has been a lot bigger than AIR for some time, I suspect the overnight crude decline will be positive for AIR in tomorrows trading session when institutional buyers come back

[Beagle]

Meanwhile the Qantas SP continues to crank along already up around 8% this year and now with a higher SP than AIR.

Last time that happened and I commented on it, that situation didn't last. One of those SP's is wrong...in my view its AIR's which deserves to be heading north towards $3.00.

[KiwiGekko]

Last time that happened and I commented on it, that situation didn't last. One of those SP's is wrong...in my view its AIR's which deserves to be heading north towards $3.00.

Lets hope you're right mate. :-)

In other news Qantas rated as safest Airline for 2015, Air NZ made the top 10. Article is here: http://www.airlineratings.com/news/425/worlds-safest-airlines-for-2015

[modandm]

That's not quite how it works. Revenue will be allocated on several factors, the predominant of which is PAX count.

Source: worked on audits pertaining to airline alliances

I understand the yield each airline generates through its sales are one of the factors. The minutiae of the deal are not material but I agree it would be interesting.

In any case glad to see the route kicking off.

I have heard gossip that the 767's may stick around longer than expected. They were supposed to be retired one-for-one with arriving 787's this year. It will be interesting to hear about this at the half year results. No doubt the lower oil price makes them more attractive, and management more confident about increasing capacity. If this were to come to fruition it would mean higher revenue growth, and with that operating leverage and profits. Thinking about it another way, these aircraft should be able to generate $10-15m each in incremental profit I would guess (somewhat out of thin air), which on aircraft worth only $10m each is pretty good going.

[Beagle]

Oil price decline continues at pace. Almost beggars belief that its more than halved in the last six months. Who would have predicted that six months ago ? Strange that the VAH SP hasn't really caught any real updraft ? I would have thought they'd be major beneficiaries of this decline given their predominantly older and less efficient fleet. Buying opportunity ?

[brend]

Oil price decline continues at pace. Almost beggars belief that its more than halved in the last six months. Who would have predicted that six months ago ? Strange that the VAH SP hasn't really caught any real updraft ? I would have thought they'd be major beneficiaries of this decline given their predominantly older and less efficient fleet. Buying opportunity ?

SP for VAH looks linear over the last 2 years

[Beagle]

Last time that happened and I commented on it, that situation didn't last. One of those SP's is wrong...in my view its AIR's which deserves to be heading north towards $3.00.

Nice to see the natural order of who deserves to be top dog with the SP restored once again. We can't have a Kangaroo on top of a Kiwi, it just wouldn't look right :D

[modandm]

Oil price decline continues at pace. Almost beggars belief that its more than halved in the last six months. Who would have predicted that six months ago ? Strange that the VAH SP hasn't really caught any real updraft ? I would have thought they'd be major beneficiaries of this decline given their predominantly older and less efficient fleet. Buying opportunity ?

Probably rather play it through AIR. Firstly at 40c VAH has been expensive due to other airlines buying in and expectations of improvement, which have been slow arriving due to FX headwinds, overcapacity and weaker demand. They do have considerable financial leverage too, so this oil price fall is acting more as a saving grace for them. The upside to VAH earnings should start to come in 2016, provided the 2 players start to behave a bit more rationally.

Qantas upside has come in part from a low valuation, part from oil (and Qantas do burn alot of fuel on long-haul 747s), part from improving domestic, and part from achieving cost savings well. As I have said in the past you can't shrink an airline successfully for long, and QAN's prospects for sustainable profit on international routes still look poor.

Lastly the VAH fleet is good, probably as or more efficient than AIR's (only 3 dreamliners so far..) 737's are mostly leased and gone after 8 years, compared to NZ who will own domestic A320's for 15-20 years (most of useful life).

[Beagle]

I've given the VAH situation some thought and I'd rather play it through AIR too.

[Beagle]

http://www.reuters.com/finance/stocks/analyst?symbol=AIR.NZ

Average analyst forecast for 2015 year has risen from 22.63 cps 2 months ago to 27.1 cps now.
This implies a $54m consensus increase in net earnings after tax from the oil price decline or $75m before tax.
I think we'll see continued earnings upgrades from the analysts as oil stays low.
Consensus 2016 EPS has grown from 25.66 cps two months ago to 30.35 cps now.

[Beagle]

Bollinger bands squeezing up so what's it to be up or down? Up would be my choice:cool:

We're on the same page with this one mate :cool:

[KiwiGekko]

Virgin announced today it is passing on some fuel savings (on some routes) from tomorrow: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11390278 - will be interesting to see how this plays out.

[KiwiGekko]

Operating stats for December are out - no real surprises there. The US airlines had a decent SP jump overnight off the back of some positive earnings news (different market but still reassuring). Weather forecast for long weekend looks nice.

All looking positive to me. :t_up:

[Beagle]

Yep, looks good to me too. Yield improvement is nice against the backdrop of very low oil prices. Approx. one month to go to Feb Operating stat's, very strong half year profit announcement and a major FY15 earnings outlook upgrade which should all happen contemporaneously in late February. Last chance to board this airbus at a reasonable price :)

[Beagle]

You'll be alright with this one mate. Expect major broker upgrades in late February after the first half announcement, (if not before). PAX and yield growth is solid and oil in the toilet = happy shareholders.

[modandm]

Not much of interest in the December stats i'm afraid. Results are going to be very dull, but the outlook will be super-bright. I am interested to see if they will delay retirement of the 767 fleet.

January operating stats will show a big jump as the Singapore route kicks off so more to see then.

Even full year won't be such big news this year, because of the hedging losses and VAH losses.

Next year is the big party though - EPS should step up to between 40c and 50c from 30c this year. The sell-side analysts still have consensus next year at 30c... wrong again. $4.00 18 month price target - 70%+ total return.

-mod

[freddagg]

Thanks Mod, as always your thoughts are hugely appreciated.

[Beagle]

Not much of interest in the December stats i'm afraid. Results are going to be very dull, but the outlook will be super-bright. I am interested to see if they will delay retirement of the 767 fleet.

January operating stats will show a big jump as the Singapore route kicks off so more to see then.

Even full year won't be such big news this year, because of the hedging losses and VAH losses.

Next year is the big party though - EPS should step up to between 40c and 50c from 30c this year. The sell-side analysts still have consensus next year at 30c... wrong again. $4.00 18 month price target - 70%+ total return.

-mod

VAH have indicated they're profitable in Q2...hard to see how they wouldn't be in Q3 and Q4 with oil where it is so although there's losses in Q1 that's only one quarter so I am more than a little surprised you're so sure the year overall will be a loss. Also we will see a lot of route and fleet rationalisation with the takeover of Tiger to be completed shortly. I guess there will be a fair amount of extraordinary items regarding rationalisation of plane leases and so on with Tiger and some in VAH itself so depending on whether people want to take this sort of thing above or below the net profit line...but as demonstrated with QAN the market is prepared to look past one off extraordinary items provided they can show quantifiable operational gains going forward.

Yes hedging losses...like 99% of the rest of the world's airlines but mitigated by some gains through exercise of put options and more specifically the fact that only circa 50% second half fuel is hedged and not all of first half either. One of the brokers are more optimistic than you with 31 cps this year which will undoubtedly be upgraded shortly. I agree with your EPS prognosis for the 2016 year..good we agree on something :) Also there was $45m in one-off's last year regarding heavy engineering redundancies and fleet rationalisation, (taken as an above the line charge), that won't repeat this year. Super low long term interest rates for the foreseeable future will also see many brokers re-working their DCF models. Oh yes indeed the outlook is super bright !!!!!, that's another thing we agree on :D

[Beagle]

http://www.cnbc.com/id/102370540
http://australianaviation.com.au/2015/01/qantas-folds-fuel-surcharges-into-base-fares-will-not-reduce-overall-pricing/

Interesting move by Qantas. I tend to agree that airfares are very cheap, in fact extraordinarily cheap in real inflation adjusted terms to what they were five years ago, ten years ago, in fact choose whatever time frame of reference you like. Good on Qantas for sticking to their guns and putting a decent return on capital invested first and foremost, sets a good precedent for AIR.

[winner69]

A bubble forming in airline stocks I fear .....outrageous profits before another collapse

http://www.smh.com.au/business/aviation/qantas-poised-to-record-1-billion-profit-ubs-20150128-12zr24.html

[Beagle]

A bubble forming in airline stocks I fear .....outrageous profits before another collapse

http://www.smh.com.au/business/aviation/qantas-poised-to-record-1-billion-profit-ubs-20150128-12zr24.html

I disagree. I expect forward growth in travel demand in the foreseeable to be very strong driven off 1. The price for travel is incredibly cheap by any relative measure in the past. 2. The tsunami of baby boomers who have plenty of wealth to enjoy travel 3. Ultra low interest rates around the globe leaving substantial amounts of extra disposable income in people's pockets. 4. Continued real decreases in the price of travel as the efficiency of new generation aircraft is gradually passed on to customers. According to CNBC there's serious supply constraint with the average forward order time for new generation aircraft now out to eight years !!
AIR management some of the very best in the business. Profits for Qantas are not outrageous, especially in the context of them losing $2.8 billion last year :eek2:
Airline shareholders are sick of getting pummelled in bad times so have every right to make serious hay when the sun shines brightly :)
Disc I have a bigger stake in AIR, (my biggest position) than HNZ, second biggest.

[Zaphod]

"Air New Zealand is being investigated by the Commerce Commission over alleged "drip pricing" tactics that have got its Australian counterparts in hot water.

Customers who book with the airline using the web or a mobile phone are shown a headline airfare, then have other charges added as they click through the process.

One of these is a domestic travel insurance charge, typically $10 for a one-way domestic flight, which is added on an "opt-out" basis, meaning it will be added to the airfare unless customers choose otherwise.

Wellington lawyer Michael Wigley has criticised the insurance charge, which he has labelled as "drip pricing", where companies advertise a low initial price then add other fees later in the purchase process."

http://www.stuff.co.nz/business/industries/65505022/air-new-zealand-drip-pricing-investigated

This could provide an opportunity to top up if the market reacts in an overly negative fashion to this.

I do however think that including the insurance as an opt-out process rather than opt-in was an unfortunate move. This is the same very annoying behaviour of many software app's that include toolbars etc. in an opt-out fashion.

[percy]

You want to try opting out on Jetstar's site.!!
Near impossible.!!

[couta1]

I can't see this having any effect on the share price just a run of the mill issue, I like one of the comments on stuff which said compared to Ticketek Air NZ are saints with Jetstar also being worse, should keep the ConCon busy for a few months giving them a break from looking into CNU- lol Disc- Loaded up on Air and ready for take off.
Reading in this mornings Herald this thing looks like a tiny blip with AirNZ and the commission having already been in discussion over the insurance thing for the past year and that it is the only issue they are looking at and the commission was NOT treating it as drip pricing.

[Beagle]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11393310

Yep, nothing to be concerned about here. Even the CEO of the travel agents association appears to accept the process is probably reasonable. Why don't the Com Com doing somethign constructive with their resouces like investigate why the retail price of milk hasn't changed despite a more than 50% drop in the price of milk powder ? Its not like families with young children can "opt out" of milk is it ?...that's assuming they can afford it in the first place !!

[couta1]

Hey Roger have you got your seatbelt firmly fastened?:eek2:

[Beagle]

Yep, sure have mate and my G suit on too...this is what's going to happen to the SP next month. https://www.youtube.com/watch?v=FiX-x3A4ndc

BTW I used to have a F6 Ford Performance vehicle called the Typhoon...it went just like that :)

[Zaphod]

Nope no effect in fact looks like another run up once the volume gets pumping:cool:

There's more likely to be a reaction on the final determination on this relatively minor issue by the ComCom, which will be some time away. Unfortunately I was hoping for some downward pressure prior to that to keep topping up, but alas!

[couta1]

Yep, sure have mate and my G suit on too...this is what's going to happen to the SP next month. https://www.youtube.com/watch?v=FiX-x3A4ndc

BTW I used to have a F6 Ford Performance vehicle called the Typhoon...it went just like that :)
Nice car and faster than a lot of V8s out there.

[KiwiGekko]

There's more likely to be a reaction on the final determination on this relatively minor issue by the ComCom, which will be some time away. Unfortunately I was hoping for some downward pressure prior to that to keep topping up, but alas!

As I understand the issue, I don't expect any reaction from this.

I see prices changing on subsequent visits as a bigger issue (when they are unaffected by clearing cookies or running in private browsing mode) - having to untick a tickbox while not being a great customer experience (although I would expect AIR NZ have done their homework here) doesn't seem very different from what I see on a *lot* of e-commerce sites.

My five cents. :-)

Disc: very happy holder.

[Zaphod]

As I understand the issue, I don't expect any reaction from this.

I see prices changing on subsequent visits as a bigger issue (when they are unaffected by clearing cookies or running in private browsing mode)


There's quite a few different causes for this, but a couple that spring to mind that are:
1. Many people make dummy bookings but hold it open in their browser with the booking eventually timing out and released back into the system.
2. Those holding fares such as travel agents, or those who choose to pay the $10/$25 hold fee.
3. The revenue team adding/removing fare buckets according to demand.

I agree that it looks bad, but there are legitimate explanations for that behaviour. AirNZ have categorically denied engaging in differential pricing.

[h2so4]

Disc I have a bigger stake in AIR, (my biggest position) than HNZ, second biggest.

Same by aprox 3X

[KiwiGekko]

There's quite a few different causes for this, but a couple that spring to mind that are:
1. Many people make dummy bookings but hold it open in their browser with the booking eventually timing out and released back into the system.
2. Those holding fares such as travel agents, or those who choose to pay the $10/$25 hold fee.
3. The revenue team adding/removing fare buckets according to demand.

I agree that it looks bad, but there are legitimate explanations for that behaviour. AirNZ have categorically denied engaging in differential pricing.

My personal experience differs somewhat, but it could be explained by the above. I will do some more research on this at some point.

In related news, the market is slowly starting to wake up:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11393826
http://www.odt.co.nz/news/business/331147/investing-air-new-zealand-really-boils-down-good-timing

Looks like Roger was spot on about the upgrades coming through, just took a couple of days for analysts to figure out what the ops stats meant eh? ;)

[troyvdh]

I readily acknowledge the good fortunes of our national airline.......however ...being curious. How many folk on this forum would travel long haul would pick AIr NZ. As opposed to Emirates or Singapore. .....this could be interesting.cheers troy

[couta1]

I readily acknowledge the good fortunes of our national airline.......however ...being curious. How many folk on this forum would travel long haul would pick AIr NZ. As opposed to Emirates or Singapore. .....this could be interesting.cheers troy
I would if I could have but unfortunately AirNZ doesn't fly to South Africa.

[bohemian]

We have traveled to Singapore on Singapore Airlines and several times to Brisbane on Air New Zealand. To me the big difference is the type of aeroplane, Boeing 777 vs Airbus what ever to Brisbane. I much prefer the Airbus. I think all the other bits of air travel are neither here nor there.

[Baa_Baa]

Admittedly it's a while ago for me, but I travelled (commuted really) from NZ to Asia via Sing, and all around SE Asia, sometimes into Nth Asia, to USA via SanFran, and over to the eastern seaboard, for four years on the trot, usually flying every second or third day or so when in the destination country. The company was paying, and they had a policy that flight over 9 hours entitled business class, nice eh :), but under that was cattle class. They also picked the airline. They picked Quaintass. On the occasions that they booked AirNZ, Sing, Emirates, China, Garouda, US Air, American Air .. etc, it was just so much more satisfying as a customer in every respect to be on Air NZ. Better service, better quality, better experience. There really wasn't a comparison, even back then, Air NZ was superior. Nowadays for our occasional overseas family holidays, it's Air NZ, no question. I want my kids to have a superior, and safe, experience in the air as well.



I readily acknowledge the good fortunes of our national airline.......however ...being curious. How many folk on this forum would travel long haul would pick AIr NZ. As opposed to Emirates or Singapore. .....this could be interesting.cheers troy

[Zaphod]

What is the consensus at this juncture on another special dividend (or large increase in normal dividend payment) being declared at FY? Based on the lower operational costs and continued improvement in yield and passenger numbers (especially if the older aircraft are retained and can be utilised to capacity), there should be a significant amount of surplus cash available. Or perhaps we'll see some additional aircraft orders placed?

[Beagle]

Its their 75th anniversary this year so while on the face of it the chances would appear slim given they've just paid one and also taking into account they have another three new Dreamliners due later this year, you never know ? N.Z. Govt loves cash coming in, trying to balance their budget so therein lies your best chance but I for one would be happy with a 20-30% uplift in the regular dividend.
Expect plenty of talk about investment in new aircraft and lounges to enhance the customer experience at the half year result this month, (that'll be AIR's way of trying to manage the demand's of the lefties for cheaper air fares). Also expect Chris Luxon to talk about the drop in the currency over the last six months as another way to manage customers price expectations. Plenty of aircraft orders already in the system to grow capacity at 5% per annum for the foreseeable future so no need for further orders at this stage. Expect a considerable strengthening in the balance sheet numbers and cash on hand at balance date.

[brend]

How many folk on this forum would travel long haul would pick AIr NZ

I do as they fly directly to shanghai (they were the only direct carrier until China Eastern entered between AKL but they might be only doing this over the summer). If I was to fly to the states my only real options is again AIRNZ unless you want to go via Aus. UK - would consider emirates and singapore but it all comes down to price. However using a air-points credit card it has strong pulling power to continue using AIR when you accumulate around $1k of airpoints per year and get lounge passes.

I have a 12 hour flight on the dreamliner this coming Thursday - anyone here want to know feedback?

I know Chris Luxon use to work at Unilever but what type of guy is he? Is he good at breaking down the supply chain and squeezing costs? The only reason I'm asking is because recently AIR cut their contract with MOA and they have also shifted their wine for economy and prem economy to one supplier.

http://www.stuff.co.nz/business/industries/65191441/air-nz-moves-to-one-wine-supplier

The airpoints program has been culled enough that frequently flyers are getting annoyed and now we have changes to the inflight products being offered - whats next?

[Beagle]

He's running a tight ship and good on him. He strikes me as a very good CEO. Yep, I'm sure we'd all appreciate some feedback on the new Dreamliner.

[m4054]

I had a 2-way trip recently between Auckland and Shanghai during Christmas and New Year in econ class, the experience was great. I couldn't believe that it was such a good sleep I ever had in flight, the lights were blue/purple inside and really made people feel comfortable sleeping. They also got all the new entertainment system - semi-metro styled touch screen with a well developed OS, USB port, earphone port for your own earphones - really handy. And we don't need to turn off electronic devices during taking off and landing anymore this was superb. One only thing disappointed me was the food was not as good as before, no ice cream, Made in China yogurt... Generally speaking it was awesome, I'll definitely still choose AIR for the next trip.

[Zaphod]

He's running a tight ship and good on him. He strikes me as a very good CEO.

I'd agree with that statement. There is a fine line between running a tight ship and making decisions that subsequently lose customers. There are some aspects of both the Koru Club and Airpoints scheme that I think have gone too far, or in completely the wrong direction, but overall things are operating extremely well.

[Toulouse - Luzern]

I readily acknowledge the good fortunes of our national airline.......however ...being curious. How many folk on this forum would travel long haul would pick AIr NZ. As opposed to Emirates or Singapore. .....this could be interesting.cheers troy

Singapore airlines for me ...

[tzbang]

Dwindling sp due to oil price climbs?

[brend]

Dwindling sp due to oil price climbs?

quite a few after market orders I see

[Beagle]

Dwindling sp due to oil price climbs?

Yep that and the N.Z. dollar has lost considerable ground in the last couple of weeks. Oil still provides a massive tailwind for AIR at the current $N.Z. price. Happy holder.

[sb9]

quite a few after market orders I see

Curious to know where do you see that information, am with ASB Sec.

[brend]

asb at the time I posted. Has changed/settled? I thought trades stopped at 1630?

[mikeybycrikey]

asb at the time I posted. Has changed/settled? I thought trades stopped at 1630?

Pre-close period starts at 4.45pm. It works just the same way that the pre-open period works. No trades occur from 4.45 until 5pm, at which point outstanding buyers and sellers are matched up. Market closes at 5pm.

This is why you might see buyers at $1.70 and sellers at $1.50 (for example) in the pre-close.

Read more about it here under pre-open/pre-close: https://www.anzsecurities.co.nz/directtrade/static/depthtutorial.aspx

[couta1]

Yep that and the N.Z. dollar has lost considerable ground in the last couple of weeks. Oil still provides a massive tailwind for AIR at the current $N.Z. price. Happy holder.
Yep I topped up today so are even more overweight at around 18% of portfolio. I reckon you'd have to be mad to sell now with expected good results only 3 weeks away ( Depends what price you paid of course) this small blip won't stop the company driving growth and profits over the next year or two IMO, anyways whatever the share price in a few weeks I will be receiving one mother of a divvy:cool:

[KiwiGekko]

I would say the NZ Dollar losing ground the past few days is the main cause. I am not sure how much impact the spot oil prices have had as most is still hedged.

Another event which I do not think has had any impact yet is the plane crash in Taiwan: http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=11396650

[Marilyn Munroe]

Virgin(Underarm Bowlers Division) have announced a quarterly profit.

The directors of Cullen Airlines can now put their Aussie subsidiary nav system on autopilot rather than tightly gripping the control column and nervously scanning the guages.

http://www.asx.com.au/asxpdf/20150206/pdf/42wfyp47smt0j8.pdf

Boop boop de do
Marilyn

[Beagle]

And before extraordinary items are in profit for the half year...looks like the analysts got this one wrong, surely I'm not the only one that can work out they'll make a profit in the 2015 financial year ?
Its hardly a subsidiary luv with 25.9% shareholding.

[iceman]

So according to Bloomberg and NBR, Branson companies have charged Virgin Australia A$ 103.1 million in licencing fees in the 10 years to 2013. Aggregated profits of Virgin Australia since IPO is A$90 million net of losses. The licencing agreement has been extended beyond the original term ending 2015 but details are confidential.
Not a bad business to be in this licencing game eh !

[Beagle]

Not bad at all. All you have to do is come up with a cute name and you're in the money. American's most loved dog is a beagle so I reckon Beagle Airways would be a huge hit in America :)
Actually speaking of one of the most adorable dog breeds in the world and airlines, here's an airline that's really got their act together when it comes to customer service, maybe a good idea for AIr N.Z.
http://www.azcentral.com/videos/news/world/2014/09/24/16163883/

Bored on the long weekend ? Check out the amazing technology and engineering expertise that's gone into building the Rolls Royce Trent 1000 engines that power AIR's new Dreamliner.
https://www.youtube.com/watch?v=VfomloUg2Gw

[noodles]

Not bad at all. All you have to do is come up with a cute name and you're in the money. American's most loved dog is a beagle so I reckon Beagle Airways would be a huge hit in America :)
Actually speaking of one of the most adorable dog breeds in the world and airlines, here's an airline that's really got their act together when it comes to customer service, maybe a good idea for AIr N.Z.
http://www.azcentral.com/videos/news/world/2014/09/24/16163883/

Bored on the long weekend ? Check out the amazing technology and engineering expertise that's gone into building the Rolls Royce Trent 1000 engines that power AIR's new Dreamliner.
https://www.youtube.com/watch?v=VfomloUg2Gw

I think you need to find some new stocks to follow Roger.

[Beagle]

That would be nice but easier said than done mate. Reasonable priced companies with a highly credible track record, sound growth prospects and excellent management are pretty thin on the ground on the NZX...vast majority of the market is very fully priced IMHO. Time to look further afield...probably.

[couta1]

That would be nice but easier said than done mate. Reasonable priced companies with a highly credible track record, sound growth prospects and excellent management are pretty thin on the ground on the NZX...vast majority of the market is very fully priced IMHO. Time to look further afield...probably.
Yep I reckon Air is great buying at current prices but not expecting that to last for that much longer, I mean why pay $3.50 ish for Spark or $2.85 for Chorus an example of 2 overpriced stocks IMO(CNU because previously when it was this price it was paying a 25.5c divvy but none currently plus all the ComCom involvement) when you can buy Air for around $2.60 with heaps more upside over the next couple of years.

[Beagle]

Here's the thing with AIR and PE multiple's. As long term interest rates have declined to historic lows most of the brokers have moved the risk free rate in their DCF models to lower and lower levels which has allowed considerable PE expansion. Well managed companies with excellent track records and sound growth prospects like AIA, FPH and RYM to name just three have ascended to very lofty multiples, (circa 30) on the back of such low interest rates.

Meanwhile over at AIR we have what appears to be an excellent management team, sound growth prospects and excellent track record yet despite historically low interest rates and significant PE expansion elsewhere in the market the market seems inclined towards holding AIR at its historic average PE of about 10 across the economic cycle ?
Why isn't it appropriate with such general market PE expansion on the back of ultra low interest rates that AIR who are about to put in place 5% capacity expansion for the next few years aren't accorded a higher across the economic cycle PE ratio ?...say 12-13 ?

Its simply not logical that they shouldn't be as PE ratio's are intrinsically inversely related to interest rates, (ultra low interest rates implies higher PE's are acceptable all other factors being equal).
Further I would argue travel is extremely cheap and getting cheaper every year in real terms and we have a younger generation who have all but given up the dream of home ownership so are more inclined to spend their disposable income and then there's the tsunami of baby boomers many of whom have high level's of disposable income and can travel regularly. Interest rates are very low and fuel prices also, adding fuel to customers disposable income So no problem on the demand side. On the supply side there's an approximate eight year wait list for new generation fuel efficient aircraft at Boeing and Airbus....so genuine issues around new supply.

AIR on a 2015 PE of about 8, (I'm at 32 cps EPS this year, 40+ next year if oil stays low) is a very very cheap stock on a fundamental basis...I would argue the cheapest out there which fits the other attributes I require. I'd rather laser focus on stocks I really think are going to go up....like this one and HNZ up 41% in the last 3 months :)

If the market is to take the position that AIR is theoretically only worth a PE of 10 across the economic cycle, then with interest rates where they are this implies the market is presently pricing the company like its a no growth company. In my view with supply / demand characteristics and stated capacity expansion over the next several years of circa 5% this stock is presently mispriced and has been for some time. Mispriced stocks intrigue me as the price inevitably heads towards fair intrinsic value over time. I see very good gains in AIR's SP in the next 12-24 months notwithstanding their excellent performance in the last 12 months.

Its clear the wild cards are the oil price and the exchange rate. My view is the market seems to be taking a view that oil prices won't be materially assistive for any meaningful length of time. Only time will tell.

[noodles]

That would be nice but easier said than done mate. Reasonable priced companies with a highly credible track record, sound growth prospects and excellent management are pretty thin on the ground on the NZX...vast majority of the market is very fully priced IMHO. Time to look further afield...probably.
Plenty of value in the small cap space, exporters, and across the ditch. Looking forward to some debate at "The Cav"

[Baa_Baa]

AIR certainly has enjoyed a good run since Oct'14. The technical breakout target @ $2.73 is the same at xmas as it is now though. Currently range trading. Price resistance in the range $2.50-2.65 with a few attempts to push up. For some reason volume has withered since Dec and is tracking under the 21d MA. Money flow is still positive but has turned down during the same period. Some might call this consolidation, there may be an ascending flag/pennant formation (positive), but it's not clear yet.

[disc: own AIR, for the divi's, though not averse to nice capital gains]

6750

[Arbroath]

I flew the Dreamliner from Perth-Auckland recently. Definitely felt fresher than after flying on more highly pressurised flights earlier that week. It's a very nice plane. My only complaint/suggestion would be better headphones as the engines (row 50 cattle class) were noisy on the first 45min ascent, so much so you needed the volume on maximum to hear a movie over them. Other than that what a great plane.

Now as far as an investment I've been in since $1.68 and enjoyed the ride and dividends. My valuation model told me full value was around $2.50 but that was when oil was $100 a barrel. Nothing is ever static but if oil can stay in a $40-70 range over the next 2 years AIR are going to pump out so much cash and with more dream liners being delivered there fuel efficiency will keep improving. Lower oil might also discourage airlines with older fleets from upgrading as fast which will hurt them medium term IMHO. Am considering adding to AIR around these levels as you can relatively conservatively make a case AIR is worth $3.50 or more a share. Agree with Roger the PE currently is stupidly low and that view takes into account the industry risk. 12 across the cycle is still conservative when you remember how strong AIRs domestic franchise is. They've had that attacked several times in the last 15 years and won every battle.

[Beagle]

Good to hear you enjoyed the Dreamliner experience. I'm comfortable with a PE of 12 across the cycle on the back of ultra low long term interest rates. The difficulty valuing AIR lies in trying to eliminate the current assistance they're getting from low oil prices and treat that as an extraordinary item and then to try and determine exactly where we are in the economic cycle. Brokers seem to be taking the view that 2016 will be the earnings peak which is probably right in as much as oil prices can't stay low forever but eliminating favourable oil from the profit who can reliably say exactly where we are in the economic cycle ?
Certainly with debt issues being problematic in many parts of the globe central banks have almost no choice but to maintain an easing bias for the foreseeable future which is generally assists towards building economic growth.

Could we be on the verge of a golden age for air travel ? New aircraft like the Dreamliner and A380 with much better quality air and significantly better effective cabin altitude pressure, (equal to 6,000 ft and 5,000 ft respectively), are making it far kinder on the body to travel which greatly assists older people especially. Are people going to be more inclined to travel with these new generation aircraft ?

[mikeybycrikey]

Its clear the wild cards are the oil price and the exchange rate. My view is the market seems to be taking a view that oil prices won't be materially assistive for any meaningful length of time. Only time will tell.

It'll be very interesting to see what the next oil hedging statement says. I'm expecting it should be in the next couple of weeks

Hopefully AIR will have locked in some of the lower oil prices for the next few months, especially since the oil price has taken a bit of a turn upwards recently.

[Beagle]

http://www.radionz.co.nz/audio/player/20166433

[skid]

Good to hear you enjoyed the Dreamliner experience. I'm comfortable with a PE of 12 across the cycle on the back of ultra low long term interest rates. The difficulty valuing AIR lies in trying to eliminate the current assistance they're getting from low oil prices and treat that as an extraordinary item and then to try and determine exactly where we are in the economic cycle. Brokers seem to be taking the view that 2016 will be the earnings peak which is probably right in as much as oil prices can't stay low forever but eliminating favourable oil from the profit who can reliably say exactly where we are in the economic cycle ?
Certainly with debt issues being problematic in many parts of the globe central banks have almost no choice but to maintain an easing bias for the foreseeable future which is generally assists towards building economic growth.

Could we be on the verge of a golden age for air travel ? New aircraft like the Dreamliner and A380 with much better quality air and significantly better effective cabin altitude pressure, (equal to 6,000 ft and 5,000 ft respectively), are making it far kinder on the body to travel which greatly assists older people especially. Are people going to be more inclined to travel with these new generation aircraft ?

Yep-all the tumblers seem to have fallen into to place for this airline (and alot of others) While it may be a good value at present,its certainly a stock that will need constant attention(not a bottom drawer) Lets face it--its a pretty unusual situation out there atm--we have gone from major Ebola scare-to suddenly cheap oil and Ebola seems like a ''no worries''
im personally glad to see this as although Im not holding-Im loving the cheap airfares.

i still think the cheap skate seating on AIR is stupid for a premier? airline but time will tell if customers put up with it if times get tough

As a result of the previous ''scares'' Malaysian air has been out doing itself to get customers back (theres some sweet deals out there atm)--RT- Ak-Bkk for $1100 with full service 30K luggage--good schedule--you can choose seats ahead of time--prob not a dreamliner,but I grabbed it with both hands---(AIR didnt even come close) for that route

Having said that-you guys could probably fly business class with your profits:)

[Beagle]

You're not wrong with your last point :D
Malaysian Airlines are a worry, that's one airline I would be extremely reluctant to fly with for the foreseeable future. Bad luck / stuff usually comes in three's, why tempt fate ?
Agree the seats width on AIR's new Dreamliner don't appear to be overly accommodative for XXL people but with all the other positive attributes of that aircraft I reckon they'll easily get away with it for the vast majority of pax. Vast majority of people are giving very positive feedback and the airline is extremely happy with the new type according to Chris Luxon at the ASM last year.

[samdaman]

Hey Roger, always love your posts on the AIR thread, keep em up. In relation to your post at #2207, I agree with you entirely especially that the "Fair" PE on air is around 11-12. I think AIR hasn't started it's next leg up for a couple of reasons.

1) People could be waiting on the Annual report for confirmation of the years earnings. To be honest I reckon take advantage of the prices now. If we're all so confident of an 11-12 PE and increased earnings then buying at these prices is potentially free money on the table.

2) The technical signs aren't pointing up at the moment (This doesn't mean they're down!). I hate to be the guy who brings technical indicators into it but a quick look at KW's post on moving averages could point out that after the fairly quick hike up of price the market is waiting for some more ducks to line up before pumping more money into the stock.

Give this one time in my opinion, I think there's definitely more upside than downside it'll just take some time for Mr.Market to realize.

[Beagle]

Thanks mate. I couldn't resist and topped up with some more today @ $2.52.5 :)
Not new news per se, but a reminder of the growth AIR have planned for the next 5 years and that AIR think the new Dreamliner is the best aircraft in the world.
http://australianaviation.com.au/2014/12/air-new-zealand-tops-up-787-order-with-two-more-aircraft/
Very recent news - Things looking up for Virgin
http://australianaviation.com.au/2015/02/virgin-australia-posts-second-quarter-net-profit/

[couta1]

Thanks mate. I couldn't resist and topped up with some more today @ $2.52.5 :)
Not new news per se, but a reminder of the growth AIR have planned for the next 5 years and that AIR think the new Dreamliner is the best aircraft in the world.
http://australianaviation.com.au/2014/12/air-new-zealand-tops-up-787-order-with-two-more-aircraft/
Very recent news - Things looking up for Virgin
http://australianaviation.com.au/2015/02/virgin-australia-posts-second-quarter-net-profit/
Good on you mate, looking at the price drop over the last week shows you how dumb Mr&Mrs Market really are, we are going to see a good or excellent result in a couple of weeks so why on earth would you sell now unless you had to? Oh well winners and losers aye:cool:

[skid]

You're not wrong with your last point :D
Malaysian Airlines are a worry, that's one airline I would be extremely reluctant to fly with for the foreseeable future. Bad luck / stuff usually comes in three's, why tempt fate ?
Agree the seats width on AIR's new Dreamliner don't appear to be overly accommodative for XXL people but with all the other positive attributes of that aircraft I reckon they'll easily get away with it for the vast majority of pax. Vast majority of people are giving very positive feedback and the airline is extremely happy with the new type according to Chris Luxon at the ASM last year.

Regarding Malaysia airlines--Lets see--let me get out my calculator and calculus book--ok -lets see...........I think Ill risk it--meanwhile talk at the travel agency is that the Malaysian Gov. is backing them 100%

No question, the dreamliner is clearly a good plane to fly in--so why would a co. like Air NZ go and ruin it by putting to many seats in them?-(other Airlines have dream liners as well)-If your going to charge a premium price-imo,you should be giving a premium product.

PS-if you dont see any posts from me after late June-you will know that I should have studied harder in Calculus class:)

[skid]

Good on you mate, looking at the price drop over the last week shows you how dumb Mr&Mrs Market really are, we are going to see a good or excellent result in a couple of weeks so why on earth would you sell now unless you had to? Oh well winners and losers aye:cool:

Couts ,that is the most entertaining post I have read this year--(dumb mr &mrs market)--winners....losers...

disc-not saying AIR wont gain--just love the irony..:)

[skid]

Hey Roger, always love your posts on the AIR thread, keep em up. In relation to your post at #2207, I agree with you entirely especially that the "Fair" PE on air is around 11-12. I think AIR hasn't started it's next leg up for a couple of reasons.

1) People could be waiting on the Annual report for confirmation of the years earnings. To be honest I reckon take advantage of the prices now. If we're all so confident of an 11-12 PE and increased earnings then buying at these prices is potentially free money on the table.

2) The technical signs aren't pointing up at the moment (This doesn't mean they're down!). I hate to be the guy who brings technical indicators into it but a quick look at KW's post on moving averages could point out that after the fairly quick hike up of price the market is waiting for some more ducks to line up before pumping more money into the stock.

Give this one time in my opinion, I think there's definitely more upside than downside it'll just take some time for Mr.Market to realize.

No such thing as free money on the table...especially in the airline industry

Technically this could go either way ,the way Im seeing it--Its just fallen to the 50ma,but has a way to go to hit the 200ma(a definite sell)---It will be interesting to see if it bounces off the 50ma and starts a new leg up or falls below--

[Beagle]

Regarding Malaysia airlines--Lets see--let me get out my calculator and calculus book--ok -lets see...........I think Ill risk it--meanwhile talk at the travel agency is that the Malaysian Gov. is backing them 100%

No question, the dreamliner is clearly a good plane to fly in--so why would a co. like Air NZ go and ruin it by putting to many seats in them?-(other Airlines have dream liners as well)-If your going to charge a premium price-imo,you should be giving a premium product.

PS-if you dont see any posts from me after late June-you will know that I should have studied harder in Calculus class:)

Regarding Malaysian airlines I'm not so sure its simply a matter of statistical probability of a theoretically random event happening three times in a row. Look at that crash of the ATR72 the other day, that airline has to retrain all its pilots because they seem incapable of knowing which engine to shut down when one has failed :eek2:...go figure.
I'm not sure why they went with the seat width they chose but its certainly possible to configure those planes with more seats than AIR have. IIRC one of the other airlines has nearly 400 seats in theirs which gives an indication of exactly how much space AIR's premium economy and business class seats take up. Maybe they're hoping "fat cat" passengers will upgrade to premium economy or business ?

[samdaman]

No such thing as free money on the table...especially in the airline industry

Technically this could go either way ,the way Im seeing it--Its just fallen to the 50ma,but has a way to go to hit the 200ma(a definite sell)---It will be interesting to see if it bounces off the 50ma and starts a new leg up or falls below--

I use the term free money loosely. If this stock did drop to the 200EMA id be surprised. I think a horrible annual would do it. But as a general consensus people don't seem to be expecting one.

[Beagle]

FYI Comsec have 2015 EPS at 26.2c (A$) and 2016 at 29.3c
Thanks KW. Average analyst forecast at this stage according to Reuters is 27.82 cps for 2015 and 30.95 for 2016.
http://www.reuters.com/finance/stocks/analyst?symbol=AIR.NZ
I'm expecting significant analyst upgrades to valuations and forecasts when the half year results are released.
Valuations will also be enhanced by many of the analysts now using significantly lower long term risk free rates in their DCF models.

[skid]

I use the term free money loosely. If this stock did drop to the 200EMA id be surprised. I think a horrible annual would do it. But as a general consensus people don't seem to be expecting one.

Im not making any forcasts--just pointing out that when it gets to the 50ma,its worth keeping an eye out--some chartists use this as a buying opportunity,but if it carries on down,then its worth watching closely and if it did get to 200ma then most chartists would probably sell.

[brend]

Completely agree they would be uncomfortable for an xxl person but this is becoming the industry norm. This is regardless of the plane being a dreamliner or not.

I can't help but think it's almost a race to the bottom...more seats on planes, smaller sizes while the price of an airfare to most overseas countries has remained relatively the same or cheaper over the last 10-15 years.

Generally I think most people are price sensitive to airfares. Most would put up with a smaller seat on 12 hour flight and have extra money for a nicer hotel or even extend a holiday for an extra day.

Anyway my review of the dreamliner. Last Thursday evening I was on NZF ( 2nd Dreamliner) delivered.

Sure enough it still has that new car smell to it. We were seated in the bassinet row at the front as we were traveling with our infant. Being stuck on the Tarmac for an hour and half I played around with the IFE entertainment system which was very impressive. It was very responsive, the picture was crisp, and very easy to use like an iPad. I think for the first time ever I tried the games available.However the screen was dirty and the food and drink service features were unavailable the entire service.

The window dimmer was very cool and effective at blocking out light however until the pilot switches off the red flashing lights on the wings some poor bugger might find that annoying.

Got off the plane feeling fine with only a couple hours sleep. Baby had no problems with pressure (thank goodness)

I also added to my holding yesterday not much more and not at the price you got roger oh well up up and away we hope? When's their result due?

[skid]

Regarding Malaysian airlines I'm not so sure its simply a matter of statistical probability of a theoretically random event happening three times in a row. Look at that crash of the ATR72 the other day, that airline has to retrain all its pilots because they seem incapable of knowing which engine to shut down when one has failed :eek2:...go figure.
I'm not sure why they went with the seat width they chose but its certainly possible to configure those planes with more seats than AIR have. IIRC one of the other airlines has nearly 400 seats in theirs which gives an indication of exactly how much space AIR's premium economy and business class seats take up. Maybe they're hoping "fat cat" passengers will upgrade to premium economy or business ?

Im sure they are hoping that whatever the reason they configured like that will increase their bottom line--whether its the right strategy is yet to be seen--As a customer though ,Im not impressed--to pay a premium price,I would like to think Im getting premium service(like Singapore Air or Emirates---I generally go for sales,but if I do decide to pay more--I would like the goods for a long flight--short ones -who cares

Meanwhile -i dont get the connection between the pilot error on the prop plane and Malaysia air(or any other airline barring the one that the prop plane belonged to) Im not sure which airline it was but I dont remember it being Malaysian.
If you drop the superstition factor then the first incident was the only one that was not a matter of being in the wrong place at the wrong time IMO--Anyway -I can update when we fly on how it goes--(if its crap i will say so)just like I did on our AK-Vancouver with AIR.
Gotta admit ,it was awesome knowing that we have seats already allocated(we are in the 2 seats by the window up near the front of economy(only 2 seats there-window and aisle)

In terms of the wonky pilot on the initial MAL flight ,I suppose one could argue that they would now be super vigilant --perhaps even more than other airlines.

I look at it as a result of 2 events (mishaps and cheap oil)coinciding to create a bargain at this point--Quantas was also a pretty good deal but the schedule was a killer.

[Beagle]

Completely agree they would be uncomfortable for an xxl person but this is becoming the industry norm. This is regardless of the plane being a dreamliner or not.

I can't help but think it's almost a race to the bottom...more seats on planes, smaller sizes while the price of an airfare to most overseas countries has remained relatively the same or cheaper over the last 10-15 years.

Generally I think most people are price sensitive to airfares. Most would put up with a smaller seat on 12 hour flight and have extra money for a nicer hotel or even extend a holiday for an extra day.

Anyway my review of the dreamliner. Last Thursday evening I was on NZF ( 2nd Dreamliner) delivered.

Sure enough it still has that new car smell to it. We were seated in the bassinet row at the front as we were traveling with our infant. Being stuck on the Tarmac for an hour and half I played around with the IFE entertainment system which was very impressive. It was very responsive, the picture was crisp, and very easy to use like an iPad. I think for the first time ever I tried the games available.However the screen was dirty and the food and drink service features were unavailable the entire service.

The window dimmer was very cool and effective at blocking out light however until the pilot switches off the red flashing lights on the wings some poor bugger might find that annoying.

Got off the plane feeling fine with only a couple hours sleep. Baby had no problems with pressure (thank goodness)

I also added to my holding yesterday not much more and not at the price you got roger oh well up up and away we hope? When's their result due?

Thanks for your review mate. Touch screens being dirty a common problem. I agree with your seat comments. Fact is most people are price sensitive. XXL people travelling to Europe are probably going to seek out Singapore with their 19 inch width economy seats or Emirates with their excellent A380 service. AIR N.Z. probably know and accept that its still more profitable to simply let those customers go rather than try to be all things to all sized people. Last year was 27 February, posted a link for easy comparison purposes in due course. To the best of my knowledge they haven't announced a fixed date for the result announcement but I'd bet serious money the poor numbers crunchers at AIR are working a lot harder than I am at present :)
https://www.anzsecurities.co.nz/DirectTrade/dynamic/announcement.aspx?id=3559374

Skid - I know a lot of airlines flew over that part of eastern Ukraine but a lot have a policy they don't fly over airspace where a country is at war. A lot take a active risk averse approach in the best interests of customer safety. CNN had a piece a while back claiming an alternate deviation route to avoid war zone airspace would only cost an extra $U.S.1,500 in fuel for the average aircraft. Not a lot extra is it to play it safe !!
Secondly I would have thought Malaysian airlines medical checks would have picked up the fact that the pilot in the other crash had major psychological problems ?
I posted the ATR incident (acknowledge its not directly related), but with all the incidents over the last year it seems to me some airlines are cutting little corners with training, medical checks and pax safety.
I'm not superstitious but I don't tempt fate either...there's a good reason Malaysian airlines are offering dirt cheap airfares all around the world, nobody would fly with them if they weren't !!
Malaysian Govt had to take 100% control of the airline as if they hadn't it would have gone broke for sure.

[skid]

Ill let you know how the flight goes(not till late June) anyway im not suggesting to go out and invest in MAL but as a customer ,it made sense to me--Thai would have been my first choice ,but to expensive since they cut down to only 3 flights a week (dang!)
There wern't many airlines flying around the Ukrane area(there were a number of reputable airlines just within minutes of the MAL flight(Singapore air was one)

Now if it was Aerofloat Id be thinking twice(one time I was on an Aerofloat flight and I asked the stewardess if I could have a coffee,she turned to me and said,''NO''(and that was that..)----I guess if I am tempting fate,I hope at least others have taken heed and maybe Ill get a whole row of seats:)

[modandm]

Model update

Assumptions: $70 Brent, 74c NZD/USD, 5.5% pax revenue growth this year and next.

Output: 43c EPS (excluding VAH)

Estimated contribution from VAH next year is 3c to earnings.

Total EPS: 46c

Pick your multiple. I continue to see >50% upside over 18 months.

-mod

[bunter]

Model update

Output: 43c EPS (excluding VAH)

Is that EPS after tax? And is it underlying earnings, as reported by AIR in the last annual report?

[Beagle]

Is that EPS after tax? And is it underlying earnings, as reported by AIR in the last annual report?

Pretty sure Mod always talks underlying EPS after tax.

[bunter]

So I took a rough average of the EPS figures floating around and settled on 33cps for 15, with 12.5% growth after.

Based on that:



8/02/15
analysis

gf
12.5%






SP
2.500

SOI
1121


















14 a

15
16
18
19
20
21
22


npat ul 1)

239.04
369.93
416.2
468.2
526.7
592.6
666.6
750.0


eps ul
0.213
0.330
0.371
0.418
0.470
0.529
0.595
0.669


po %
65%
65%
65%
65%
65%
65%
65%
65%


gdps
0.138889
0.215
0.241
0.271
0.305
0.344
0.387
0.435


gy%
5.6%

8.6%

9.7%

10.9%

12.2%

13.7%

15.5%

17.4%




































Valuations









Graham 15
7.14









Div flow
4.32










An airline possibly deserves some sort of discount.

Finally took my head out of the sand and bought some more today.

[samdaman]

So I took a rough average of the EPS figures floating around and settled on 33cps for 15, with 12.5% growth after.

Based on that:



8/02/15
analysis

gf
12.5%






SP
2.500

SOI
1121


















14 a

15
16
18
19
20
21
22


npat ul 1)

239.04
369.93
416.2
468.2
526.7
592.6
666.6
750.0


eps ul
0.213
0.330
0.371
0.418
0.470
0.529
0.595
0.669


po %
65%
65%
65%
65%
65%
65%
65%
65%


gdps
0.138889
0.215
0.241
0.271
0.305
0.344
0.387
0.435


gy%
5.6%

8.6%

9.7%

10.9%

12.2%

13.7%

15.5%

17.4%




































Valuations









Graham 15
7.14









Div flow
4.32










An airline possibly deserves some sort of discount.

Finally took my head out of the sand and bought some more today.

Hey bunter, cheers for the valuation. Just delving in to your model.

-Have you used 12.5% as the terminal growth rate? If so whats the justification, it seems very high.

- what discount rate did you use in your model?

Cheers
Sam

[vin]

Up 4.4% this arvo, lovely finish. Stoked I topped up yesterday

[bunter]

Hey bunter, cheers for the valuation. Just delving in to your model.

-Have you used 12.5% as the terminal growth rate? If so whats the justification, it seems very high.

- what discount rate did you use in your model?

Cheers
Sam

Agree it's high, especially for an airline.
Originally my thinking was '30% gain likely in 2015, less after, average 12.5%"

Then I plugged in an estimate of the 2015 profit but didn't revise the TR down. Thought about it!
9% TR would bring the value down from 4.32 to 4.23 - note this model 'only' looks 10 years ahead - you might use the term TR differently.

AIR's profit went up a lot last year and looks like another big gain this year. So perhaps 12.5% pa can be attained on average over the subsequent 8 years. More likely not.

Discount rate - current long term bank rate 5%.

[skid]

It has dipped just below the 50ma(just to shake out the novices and hit some stops)and then bounced so I would assume the chartists would be happy--dyor-some of the more experienced chartists could maybe add more insight

[modandm]

It's nothing to do with any moving average. The share price had dipped as oil rose. Oil fell and the shares bounced back. Normal short term market volatility.

My estimates on the previous page are after tax earnings. Yes they would be comparable to 'normalised earnings' as I have not incorporated any gain or loss on hedging future periods.

No offence but DCF's are generally not a great valuation method, and even less appropriate for volatile industries such as this. Common methods would be using peer group multiples such as EV/EBIT, EV/EBITDAR, P/E, and P/B vs ROE. Fundamentally AIR is cheap vs peers, which I believe is unwarranted given the lack of competition it faces, strong management, fleet age, and so forth.

I have commented in the past about how an appropriate multiple should reflect where in the cycle the company is. In FY16 I see AIR at mid cycle, with macro tailwinds through lower oil. As such I expect the stock to trade on about 9x historic earnings and a 6% yield. Fortunately on my estimate of 46cps EPS FY16 that still gives us a lot of upside (to $4.14) and we will be paid well to wait with dividends.

After FY16 earnings momentum will slow considerably - about 10%-15%p.a based on constant FX and fuel (which obviously aren't constant). However the company will be generating tremendous free cash flow. This means BIG special dividends and good valuation support.

I'm glad to see others are on-board so to speak - but don't be impatient with this one. I expect the journey north to be gradual, and with some turbulence. Just relax to a nice movie, and keep a close eye on the external factors...

- Mod

[Beagle]

It's nothing to do with any moving average. The share price had dipped as oil rose. Oil fell and the shares bounced back. Normal short term market volatility.

My estimates on the previous page are after tax earnings. Yes they would be comparable to 'normalised earnings' as I have not incorporated any gain or loss on hedging future periods.

No offence but DCF's are generally not a great valuation method, and even less appropriate for volatile industries such as this. Common methods would be using peer group multiples such as EV/EBIT, EV/EBITDAR, P/E, and P/B vs ROE. Fundamentally AIR is cheap vs peers, which I believe is unwarranted given the lack of competition it faces, strong management, fleet age, and so forth.

I have commented in the past about how an appropriate multiple should reflect where in the cycle the company is. In FY16 I see AIR at mid cycle, with macro tailwinds through lower oil. As such I expect the stock to trade on about 9x historic earnings and a 6% yield. Fortunately on my estimate of 46cps EPS FY16 that still gives us a lot of upside (to $4.14) and we will be paid well to wait with dividends.

After FY16 earnings momentum will slow considerably - about 10%-15%p.a based on constant FX and fuel (which obviously aren't constant). However the company will be generating tremendous free cash flow. This means BIG special dividends and good valuation support.

I'm glad to see others are on-board so to speak - but don't be impatient with this one. I expect the journey north to be gradual, and with some turbulence. Just relax to a nice movie, and keep a close eye on the external factors...

- Mod

Good post. Its fraught with enormous variables trying to reliably estimate earnings in this company which makes projections beyond 2016 notoriously difficult.

Another way to look at this stock...just an idea.

1. Eliminate the tailwind from the oil price to assess underlying earnings net of fuel price... I see 25 cps for 2015 and about 26.5 cps for 2016 based on their 5 % capacity growth and some very modest net yield growth. This year's fuel price tailwind is estimated at around 6-7 cps after tax, about $75m after tax which is broadly consistent with how the brokers are estimating this, BUT this could be dramatically underestimating this extraordinary gain. I think all the risk is to the upside.
2. Remember that as they push for new routes load factors may come under a bit of downwards pressure overall.
3. Estimate 7 year average growth rate based on known underlying factors excl fuel price tailwind. This is incredibly difficult. We know they're growing capacity at 5% per annum for the next half decade and that's all the forward guidance we have to go on so if we use 5% as the average underlying growth rate in EPS this seems most logical to me.

Using Ben Graham's formula V= last years EPS x (8.5 + 2g) where g is the only guide we have from the company at 5% and last year's EPS was 22 cps we get 22 x 18.5 = $4.07

Using my tight arsed accountant's approach to buying growth on the cheap V = forward earnings, (exclusive of fuel price tailwind) x (8.5 + 1g) I get this stock as being great value up to 25 x 13.5 = $3.38.

I prefer my valuation method and am happy to hold my maximum 20% portfolio allocation as it gradually climbs up towards the mid $3 range. If it tips a bit over 20% of my portfolio as it climbs up to $3.50 I'm all good with that :-)

[modandm]

1. You can't ignore a lower fuel price, and then penalise them on yield.
2. This is an operationally and financially leveraged business. If they grow revenue at 5%, earnings grows much faster than that.

I'm halfway through the intelligent investor, but I haven't seen Ben's method. It doesn't make much sense to me - at least not for this stock.

The brokers are as wrong on this as they were 2 years ago. They are smart people constrained to be conservative and not take career risk. They get paid on trading commissions not on the accuracy of their predictions. The sooner you make your own assumptions and estimates the better you will do as an investor.

[modandm]

Here's a post i made over 2 years ago. (#743 page 50)

I was estimating 26c FY14 and 32c FY15. FY14 turned out 24c and FY15 is going to be about 28c. NZD has gone down since then but so has fuel.

The brokers had something like 15c and 16c....

It's that difference, and the confidence I had, (because I did my own analysis), that gave me the opportunity to become very rich. I believe that opportunity still exists today.

And golden city asked me in the next post 'does this forecast come with credential?' gotta say I have the credentials now!

Edit: take a look at point 2 in bold - what bloody foresight!



Just been playing with my model so a quick update.

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

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

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

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

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

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

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

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

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

[Beagle]

Doesn't really matter which valuation methodology one uses, all the signposts point north, that's what really matters :)

[Hoop]

It has dipped just below the 50ma(just to shake out the novices and hit some stops)and then bounced so I would assume the chartists would be happy--dyor-some of the more experienced chartists could maybe add more insight

Interesting example for TAists...and for the major others that TA discipline should be used to indicate when a situation changes..........

TA does not predict the future. However many TAists especially Chartists do work on the probability of a happening...

The AIR chart situation is interesting as the Bollinger Bands had tightened and ready to expand again ...we know BB indicates a trend behavioural change and often with a weakening stock our human behavioural instinct warns us to be careful thereby creating a negative bias emotion which makes us vunerable to got caught up in fake outs..

The TA methodology is to watch carefully

A fake out occurs when a stock price and its TA indicators weakens to a point when one (or two) indicators are close to or just trigger sell signals The TAist sees this situation and prematurely sells out to beat the seller rush preempting a possible downward break happening...then the opposite happens the stock bounces off its supports and rallys.. the TAist is faked out by mistiming their sell and selling out at the bottom...

The old story goes.."don't rely on one indicator alone"...use at least 4..

the above advice sounds nice and textbooky.and another old story is never sell close to a support..but...That does not suggest AIR is going to go up..At the moment it could go 3 ways, up, down, or sideways.. we have to wait for confirmations from other TA and chart indicators..which by then AIR's price trend action will be known...and TA discipline would have shown when it happened..e,g see blue dotted vertical line..(this is the point when buying risk is greatly reduced)

The green line is the price of Brent oil...note the poor correlation...

EDIT:...AIR has been in a primary uptrend since July 2012 and AIR's shareprice has so far risen +300%.....For the oil/air pundits...the opposite occurred during July 2012, AIR uptrend commencement coincided with the start of an oil price uptrend.

Re-EDIT.....forgot to add the negative divergence line to the RSI indicator...this is important factor to my argument in the post..

http://i458.photobucket.com/albums/qq306/Hoop_1/AIR%2011022015_1.png (http://s458.photobucket.com/user/Hoop_1/media/AIR%2011022015_1.png.html)

[Leftfield]

Great post Hoop - Thanks!

[Beagle]

25th February is the day for the half yearly result announcement
https://nzx.com/companies/AIR/announcements/260584

[Beagle]

Using my very secret and very special supplementary valuation tool, :ohmy: (the red kangaroo stock is now priced higher), AIR must be very cheap.

[KiwiGekko]

Using my very secret and very special supplementary valuation tool, :ohmy: (the red kangaroo stock is now priced higher), AIR must be very cheap.

I think you are right mate, but I guess we will see what the market thinks eh - it might think it can get even cheaper? ;-)

Some light reading for your Saturday afternoon: Oil is creeping back up taking out $60 for the first time this year (OK it's only February): http://www.reuters.com/article/2015/02/13/us-markets-oil-idUSKBN0LH08120150213

Like Reuters Bloomberg also think this is a false flag: http://www.bloomberg.com/news/articles/2015-02-13/this-chart-shows-why-the-number-of-oil-rigs-may-not-matter-anymore I haven't researched this yet (will try to later on) - but there may be a bit more turbulence next week?

[tim23]

Interesting post hoop but won't any stock be going up,Down or sideways?

[Beagle]

I think you are right mate, but I guess we will see what the market thinks eh - it might think it can get even cheaper? ;-)

Some light reading for your Saturday afternoon: Oil is creeping back up taking out $60 for the first time this year (OK it's only February): http://www.reuters.com/article/2015/02/13/us-markets-oil-idUSKBN0LH08120150213

Like Reuters Bloomberg also think this is a false flag: http://www.bloomberg.com/news/articles/2015-02-13/this-chart-shows-why-the-number-of-oil-rigs-may-not-matter-anymore I haven't researched this yet (will try to later on) - but there may be a bit more turbulence next week?

Not worried about the short term mate. Nobody can reliably get a handle on how long the oil price will remain a tailwind. As per post #2240 my assessment of fair intrinsic value for the stock, net of any fuel price tailwind is $3.38.
Add to that whatever gains they might make to earnings from oil under $100 for however long it stays there. I think about 7 cps this year and about 15 cps next year if it stays around the current level.

In a perverse way oil rebounding up to about $70-80 might really help AIR with their positioning in terms of a relatively new fuel efficient fleet.

[Beagle]

I think you are right mate, but I guess we will see what the market thinks eh - it might think it can get even cheaper? ;-)

Some light reading for your Saturday afternoon: Oil is creeping back up taking out $60 for the first time this year (OK it's only February): http://www.reuters.com/article/2015/02/13/us-markets-oil-idUSKBN0LH08120150213

Like Reuters Bloomberg also think this is a false flag: http://www.bloomberg.com/news/articles/2015-02-13/this-chart-shows-why-the-number-of-oil-rigs-may-not-matter-anymore I haven't researched this yet (will try to later on) - but there may be a bit more turbulence next week?

Not worried about the short term mate. Nobody can reliably get a handle on how long the oil price will remain a tailwind. As per post #2240 my assessment of fair intrinsic value for the stock, net of any fuel price tailwind is $3.38.
Add to that whatever gains they might make to earnings from oil under $100 for however long it stays there. I think about 7 cps this year and about 15 cps next year if it stays around the current level.

In a perverse way oil rebounding up to about $70-80 might really help AIR with their positioning in terms of a relatively new fuel efficient fleet.

Any correction to circa $2.50 will see me buying more :)

[tim23]

Roger - can't these chart pros predict oil price?

[Baa_Baa]

The chart pros can confidently predict that the price will go up, down or sideways. The amateurs simply wonder in amazement at how powerful supply manipulation is. IMHO, the charts are little or no help in predicting price in a controlled market, except perhaps timing confirmed entry or exits.

http://research.stlouisfed.org/fred2/series/WCOILBRENTEU


Roger - can't these chart pros predict oil price?

[Baa_Baa]

Speaking of price charts, I hadn't actually stepped back to look at AIR [disc: hold a modest %]. This is a monthly line chart with the 200 day EMA. The rising trend lines are high/low price (which is why they don't touch the closing price line). What a schizophrenic share, it's all over the place! I remember the collapse and govt bailout, but even after that it's just crazy volatile. The last three years have been good for AIR. Assuming the good times continue, I'm accumulating any weakness, however a breakdown through the 200MA would be sayonara baby.

7054

[Hoop]

Speaking of price charts, I hadn't actually stepped back to look at AIR [disc: hold a modest %]. This is a monthly line chart with the 200 day EMA. The rising trend lines are high/low price (which is why they don't touch the closing price line). What a schizophrenic share, it's all over the place! I remember the collapse and govt bailout, but even after that it's just crazy volatile. The last three years have been good for AIR. Assuming the good times continue, I'm accumulating any weakness, however a breakdown through the 200MA would be sayonara baby.

7054
Hi Baa Baa

No, No, No, not a schizophrenic all over the place stock ..your chart shows AIR as great example of a cyclical stock (http://www.investopedia.com/terms/c/cyclicalstock.asp) :)...

note the 2001/03 recession, 2006/07 boom, 2008/09 recession, 2011/12 global hiccup, 2014 boom

[Baa_Baa]

Thanks Hoop for a better description, though same response (note: to moi - exit capital on the next major downturn).


Hi Baa Baa

No, No, No, not a schizophrenic all over the place stock ..your chart shows AIR as great example of a cyclical stock (http://www.investopedia.com/terms/c/cyclicalstock.asp) :)...

note the 2001/03 recession, 2006/07 boom, 2008/09 recession, 2011/12 global hiccup, 2014 boom

[Zaphod]

Now for the hard part; you just need to predict when that time will be!

Based on the current market situation and on the financial analysis presented in this forum, FY 16 will be another bumper year for AirNZ and (as Modandm stated) while growth most probably slows subsequent to that, the company will generate large free cash flows. These are likely to be distributed these as dividends which should push the SP up further as investors late to the party clamor for the dividends.

Baring a massive sudden increase in Brent, a world-wide geopolitical event, recession or a calamity, at this point I can't see the SP declining significantly within the next few years.

We just need to keep a firm eye on the key variables.

[Hoop]

Now for the hard part; you just need to predict when that time will be!

Based on the current market situation and on the financial analysis presented in this forum, FY 16 will be another bumper year for AirNZ and (as Modandm stated) while growth most probably slows subsequent to that, the company will generate large free cash flows. These are likely to be distributed these as dividends which should push the SP up further as investors late to the party clamor for the dividends.

Baring a massive sudden increase in Brent, a world-wide geopolitical event, recession or a calamity, at this point I can't see the SP declining significantly within the next few years.

We just need to keep a firm eye on the key variables.

Best of luck Zaphod with your methodology..I think you'll need it

Cyclical stocks are notorious beasts..they can make you a fortune but they are also portfolio destroyers..One should never use long term buy and hold investment strategies with Cyclical Stocks..the risk is too great

During economic down periods the financial section of the newpapers are littered with examples of shareholder destruction and Government bailouts...OK..they may seem great in a bull market but the risk is often too great and most people would know at least one person in the investment world who chooses to keep well away from cyclical stocks and invest their lifetime hard earned savings within a much safer low growth high dividend more stable environment...People tend to be more optimistic with their forward fundamentals when they surrounded within an upbeat economic environment...so the failure to time the exit can be the killer..

Thinking and analysing using forward fundamentals??...forget it... See chart below and say to yourself would you have got out using the TA cyclic reversal sell trigger when:;..
1..I don't believe in TA longer term future the share price is only in a correction..
2.. I believe in brokers forecasting rather than squiggy lines
3....the Olympic games are coming down under and NZ has formed alliances to take full advantage of that..it's one time boom waiting to happen..
Imagine selling out at $2.00 in April 2000 after a +54% increase in interim profit, the brokers forecasting a +25% profit next year and the Sydney Olympics due to start in 6 months...would you????..TAer might but a med/long term FAer? I don't think so....6 months later the share price is $1.70 and Olympic games begin...do you sell now????

Cyclical stocks are much more sensitive to variables than the non-cyclical stocks and sudden happenings occur which some are destructive...You will find some Investors having a portfolio management strategy..by investing in the exciting up trends of cyclicals during economic recoveries then shifting to the boring more slow rising non-cyclicals as a type of portfolio defense when (s)he feels the economic boom is at or past its peak...

http://i458.photobucket.com/albums/qq306/Hoop_1/AIR%20199-2001%20broker%20forecasts.png (http://s458.photobucket.com/user/Hoop_1/media/AIR%20199-2001%20broker%20forecasts.png.html)

[Xerof]

Hoop, a quick glance (as usual) at your chart throws out an almost textbook bearish bat formation nearly completed. Gut instinct (only) suggests it's a sell around $3

[Beagle]

Roger - can't these chart pros predict oil price?

I don't think anyone can but the international energy agency reckons we're in a classic over-supply situation with an estimated 2m barrels a day looking for a home / storage facility.
Long term futures still tend to indicate that lower prices will be "sticky"

Sure its a cyclical stock but nobody seems able to reliably predict what part of the cycle we're at. Maybe we're only in the second year of what could be a seven year bull phase for growth ? The way I see it, central banks around the world have no choice but to initiate policies that perpetuate ultra low interest rates for the foreseeable future, perhaps for as long as a decade ?. Such an environment is usually good for a sustained period of growth and relatively high level's of consumers disposable income....for I dunno what ?, maybe travel :)

[winner69]

Hoop, a quick glance (as usual) at your chart throws out an almost textbook bearish bat formation nearly completed. Gut instinct (only) suggests it's a sell around $3

Mr Bulkowski doesnt seem to mention bat formations in his book

What they look like ...interested I am in new things

You were right with the flags etc on the aud thread (at least think it was you)

[Xerof]

It looks like this:
7061

funnily enough, this is a bearish bio-tech bat...
7062

but the bearish bat formation belongs to the 'gartleys, butterflys, bats and crabs' family of chart formations on which there is masses of info on the net. I guess the bat formation is named such due to the height of the 'wings' on each side of the formation.

Fits well with cyclicals, which do tend to be strong trenders once a new trend develops. We are seeing this in AIR right now, it is strongly trending, and no imminent reason to buck the trend. I say the $3 area might be an interesting point to be wary, because of my batty outlook of charts

[winner69]

thanks xerof

I sort of guessed something like that

Couldn't see where cricket bats came into it

[KiwiGekko]

Operating stats and Hedging update are out:

Op stats: https://nzx.com/files/attachments/208174.pdf
Hedging update: https://nzx.com/files/attachments/208175.pdf

[Beagle]

Here's there last fuel hedge disclosure in late October 2014
https://nzx.com/companies/AIR/announcements/256764

Although the current mark to market number looks a bit unfortunate this will be something AIR has in common with the vast majority of other airlines around the world and it needs to be viewed in context with:-
1. The current very low spot prices which nobody would have been game enough to predict six months ago
2. The fact that they haven't hedged much extra at all since October, just a little more for Q4 2015.
3. The company will accrue some benefit from unhedged fuel in the first half and significant benefits in the second half
4. Very little fuel hedging is in place for FY 2016

Operating stat's looks good to me. Solid demand and some yield growth. New route to Singapore demonstrates the airlines ability to materially grow capacity over time and marks a major departure from many years of very close to zero capacity growth i.e its now a growth stock:t_up:

Looking forward to next week's result and outlook upgrade.

[IAK]

Article in NZ Herald.....Aussie turbulence for Air New Zealand. Virgin's loss will hurt AIR NZ's bottom line.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11404817

[dingoNZ]

This has been know for sometime and is well factored in..

[modandm]

Decent result from VAH, they are improving nicely. Bodes well for a contribution in 2016.

The big question I have on AIR for FY16 is the yield assumption. I was slightly disappointed at the yield decline in January. There is a mix shift towards lower yield long haul, which does create headwinds, but these could be offset by a weaker NZD and by stronger demand. Guidance as to how they see demand, and yields progressing will be key. It's a big swing factor.

They have raised their fuel consumption forecast (again...), does this mean more capacity is planned? Possible 767 retirement delay? I hope so.

[Beagle]

I'm hoping all those silly shareholders reading this old news smack it down to $2.50 and then its hammer time.

[Beagle]

Yep anything under $2.55 and I'm getting more.

Good place for some of your SUM sale funds...just a "slight" difference in the calibre of management between those two companies :)

[Marilyn Munroe]

Remeber me warning about the risk to Cullen Airlines from all the surplus and underutilised A320's in the near abroad?

http://www.ausbt.com.au/airasia-x-eyes-australia-new-zealand-flights

Boop boop de do
Marilyn

PS. John Key should sell Cullen Airlines to Etihad before the competition heats up any further.

[Beagle]

Remeber me warning about the risk to Cullen Airlines from all the surplus and underutilised A320's in the near abroad?

http://www.ausbt.com.au/airasia-x-eyes-australia-new-zealand-flights

Boop boop de do
Marilyn

PS. John Key should sell Cullen Airlines to Etihad before the competition heats up any further.

AIR's in great shape...no reason to sell. Wait for next week's results and you'll see.

[Chinesekiwi]

Decent result from VAH, they are improving nicely. Bodes well for a contribution in 2016.

The big question I have on AIR for FY16 is the yield assumption. I was slightly disappointed at the yield decline in January. There is a mix shift towards lower yield long haul, which does create headwinds, but these could be offset by a weaker NZD and by stronger demand. Guidance as to how they see demand, and yields progressing will be key. It's a big swing factor.

They have raised their fuel consumption forecast (again...), does this mean more capacity is planned? Possible 767 retirement delay? I hope so.

Hello

Yes - Air NZ will retain its 767's for a longer period than planned.

[Baa_Baa]

AIR announce HY results next week on Wednesday 25th, looking forward to it. The Investor Briefing Webcast will be here at 10:30am http://www.airnewzealand.co.nz/latest-annual-and-interim-reports

The sp has range traded since mid Dec, after the breakout Nov 27, not quite making the TA target of $2.73 but getting close at $2.61 high on Jan 29 & 30, notably the price action includes a successful test of the 50day EMA on Feb 10 & 11. Another share poised waiting for the HY announcement.

7112

[couta1]

Baa Baa for two days a couple of weeks ago the price hit $2.68 before closing down at $2.61-$2.62 I know I was watching but i must say im surprised it hasnt topped $2.70 in anticipation of the coming results obviously no leaky ship here. Perhaps the Herald with their negative old news has spooked some causing selling pressure.

[Zaphod]

Hello

Yes - Air NZ will retain its 767's for a longer period than planned.

Given the above, I assume these aircraft would remain on the PI and HNL routes. Competition on the latter could heat up further if HA increase flight schedules, so perhaps it is time for NZ to replace the 767 and use a 777-200ER on that route thereby increasing both capacity and offering far superior hard and soft products.

[Beagle]

Poor AIR can't catch a bid :confused:. Oil fell Friday, American airlines SP's performed well on Friday, Qantas is up to $2.76, (I hate it when the red kangaroo's SP outperforms AIR), VAH is closing in at 49 cents on its five year high of 51 cents, the currency has moved north of 75.00 cents American and the half year announcement is out on Wednesday and yet the SP is stuck at $2.60 ?. Market seems very reluctant to take it past $2.60 on a sustained basis, go figure ???

[KiwiGekko]

Poor AIR can't catch a bid :confused:. Oil fell Friday, American airlines SP's performed well on Friday, Qantas is up to $2.76, (I hate it when the red kangaroo's SP outperforms AIR), VAH is closing in at 49 cents on its five year high of 51 cents, the currency has moved north of 75.00 cents American and the half year announcement is out on Wednesday and yet the SP is stuck at $2.60 ?. Market seems very reluctant to take it past $2.60 on a sustained basis, go figure ???

Yep, I agree with you here mate, this is inline with what I have seen for the past few months as well. Oil goes up? AIR SP goes down. Oil goes down, Other Airlines go up, AIR? no change. Market seems a bit edgy I feel, and today it could be partly because of these articles:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11406390
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11406106

Seems AIR has been getting a bit of a beat up in the press lately - hopefully the news on Wednesday changes its attitude? Either way I am still holding. :)

[brend]

Hello

Yes - Air NZ will retain its 767's for a longer period than planned.

source of information please? because it doesn't fit into the structure on their investor presentation i.e slide amount crew/pilot teams etc.

[martinchnz1]

http://www.interest.co.nz/business/74176/air-new-zealand-will-give-clearer-indication-where-it-its-fuel-price-hedging-strategy

Good article raising some discussion about fuel hedging for AIR

[Beagle]

Yep, I agree with you here mate, this is inline with what I have seen for the past few months as well. Oil goes up? AIR SP goes down. Oil goes down, Other Airlines go up, AIR? no change. Market seems a bit edgy I feel, and today it could be partly because of these articles:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11406390
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11406106

Seems AIR has been getting a bit of a beat up in the press lately - hopefully the news on Wednesday changes its attitude? Either way I am still holding. :)

Editor of the N.Z. Herald gave AIR a real sustained pasting about the Hawaiian maintenance fiasco a while back that affected the SP, (the nature of the sustained negative publicity "attack" bordered on being actionable in my opinion so I warned him of that)...probably gave associated parties and his family interests a good opportunity to buy...and then suddenly a string of positive news and the SP went north...history repeating itself albeit more moderated and less sustained this time ?

[KiwiGekko]

There ya go Roger, AIR finished up. Still no where near your Aussie pals SP though! :)

[Beagle]

There ya go Roger, AIR finished up. Still no where near your Aussie pals SP though! :)

I might have had something to do with that in more ways than one :)

[Chinesekiwi]

source of information please? because it doesn't fit into the structure on their investor presentation i.e slide amount crew/pilot teams etc.


From within the company itself, potentially to with an anticipated 787 delivery delay.

[brend]

Strong result.

44% increase in dividend payout.

Comes with possible earnings upgrade if the later half of the year that we all know. "The company stated in November that should the then current level of jet fuel price persist, there would be a significant additional improvement in earnings in the second half of the financial year. "

https://nzx.com/files/attachments/208674.pdf

Also I had the inflight service manager ask me for feedback on his team coming back from PVG saturday night. Seems like they might have high staff turnover on their Chinese teams? Regardless I felt it was positive in him asking direct for customer feedback.

[Beagle]

Yep I am happy with that result. Normalised earnings excl VAH equity accounted losses are $230m up from $180m in the pcp (up 27.8%).
Company has quantified 2H net fuel gains at $82m at present prices.
Strong currency hedging in place for 2H 2015 and 1H 2016 at very attractive forward rates
Fuel gain of circa $250m in 2016 if fuel stays where it currently is
Analyst presentation https://nzx.com/companies/AIR/announcements/261096
Happy with the fully imputed dividend which is slightly higher than I expected
Company seems well pleased with the new Dreamliner performance

Air is very well positioned :)

[brend]

current media release being live streamed via NZherald.

I wonder if this can be viewed later??

[modandm]

Initial thoughts:

better dividend then we thought!

Better cargo revenue and contract services revenue than I had (I was conservative)

They have spelled out the fuel benefit next year which is HUGE - $250m!!, this will get people excited.

And they have hedged FX very well

2H15 is 94% hedged at 0.8452 > 1H16 is 80% hedged at 0.8175

Obviously much better than 75c which is spot.

Expect the shares to be up today. Those brokers will be scrambling to upgrade their FY16 eps estimates... 31c... more likely 45c...

-Mod

[brend]

For those interested - recording of today's results.

http://new.livestream.com/accounts/7153328/airnzinterimresults/videos/78221890

[modandm]

For those interested - recording of today's results.

http://new.livestream.com/accounts/7153328/airnzinterimresults/videos/78221890

thats just for the media. The analyst presentation is at 10:30am...

[Beagle]

Initial thoughts:

better dividend then we thought!

Better cargo revenue and contract services revenue than I had (I was conservative)

They have spelled out the fuel benefit next year which is HUGE - $250m!!, this will get people excited.

And they have hedged FX very well

2H15 is 94% hedged at 0.8452 > 1H16 is 80% hedged at 0.8175

Obviously much better than 75c which is spot.

Expect the shares to be up today. Those brokers will be scrambling to upgrade their FY16 eps estimates... 31c... more likely 45c...

-Mod

Yep I was especially pleased with the extent of and attractive rates on FX forward cover.
Potential fuel price gain next year is a real cracker.
Gearing is up with the acquisition of 3 new 787-9's in the period so I'm not expecting a special divvy this year but ordinary final divvy could be very good if we see fuel price gains materialise fully.

Maybe 8 or 9 cents fully imputed. If we call it 8.5 cents final that's 15 cps fully imputed for the year or 15 / 0.72 = 20.83 cents gross / 260 = 8% gross dividend yield. This means we're being paid very handsomely as well as enjoying tremendous growth !!!!!!

[modandm]

From the call it seems management are pretty confident about demand and yields. More than expected. Pretty bullish!

I was also impressed that when asked about political/PR pressure to lower fares Rob was pretty resolute that fares were fair! Thumbs up!

All in all excellent results! A detailed model update will follow in a few days.

Brief notes:

Forward demand: Revenue in advance only up 2% vs significant increase in capacity?
Chris: Demand is strong, asia, we are confident
Rob: Asian forward sales Yen/AUD weaker, revenue from codeshare with Singapore airlines only arrives when flown hence forward revenue is understated somewhat.

Competitive environment: Jan stats showed a lowering of yield advancement – have you seen prices moving lower?
Rob: FY16 competitive threats may occur, as yet we are not seeing adjustment to capacity, also supply chain for aircraft puts a constraint on capacity. Everyone’s capacity increases together. NZ is not a big business class high yield, so not that attractive. Network decisions reflect economics. Don’t expect competition to toughen much.

Have you seen yield compression yet?
Rob: No, price is set by demand and supply. Some markets are struggles Asia etc, others such as US remain strong.

$249m improvement due to fuel brings political pressure to lower fares?
Rob: 10 years ago, oil was what it is now – ccy same. Average domestic fare is the same. In the interim a lot of costs have gone up airports etc.

Marcus: Underlying ccy yield declines would not be expected for the 2nd half?
Rob: Growth from LH – so mix shift negative. Other than that no.

Singapore – no material impact on LH yields?
Rob – good demand, starting into that route lower yield (certainly than US!)

Labour 80ppl added, more? Rates? One-offs? Upfront coming off? Pilots?
Chris: Training bubble is nearly through, resets (cabin crew),
Rob: Headcount – altitude 100 people left, actual operational increase was 200, c2% but filled 10% growth in January. Lots of training last 18 months. Pretty well through this now – few seat changes left.

End of year and balance sheet – how does the board look at specials again?
Rob: can’t comment. Looking back at previous capital management – was a reflection of where cash was. Don’t confuse equity and liquidity. One thing is we will borrow less with new a/c. 44% increase in dividends reflects where we see earnings are heading.

Is this bigger dividend indicate a higher sustainable pay out or reflecting stronger growth?
Rob: Reflects the stronger growth expected.

-regards mod

[KiwiGekko]

Cheers Mod, much appreciated. :)

[hoyinma]

Thanks Mod, appreciated.:t_up:

[percy]

Yes,Thank you.

[Beagle]

Yes,Thank you.

You know you want some more of this stock :cool: (Disc bought more Monday / Tuesday @ $2.57 and again this morning at $2.62).

[percy]

You know you want some more of this stock :cool:

I do,I do,I do [feel as though I am marrying AIR] !!! lol.
And yes you and Forest were right!!!!!!

[h2so4]

Excellent

I am pleased Buffetts 0800 airline investment hotline is blocked to AIR investors.

[KiwiGekko]

Disc bought more Monday / Tuesday @ $2.57 and again this morning at $2.62

Well done, I am overloaded already on AIR otherwise probably would have topped up too. I came along a little late to the party, so my average buy at present is $2.46.

Very happy with the result today - the difference in the way Stuff / NZH reported the result is fascinating, this tweet sums it up nicely: https://twitter.com/darrinlim/status/570359160073687041

[Beagle]

I've done some quick back of the envelope calculations on next year's EPS. By my reckoning $700m underlying profit before tax is on the cards, (about $500m after tax) and that's a whopping EPS of 45 cents per share !!!! I'd love to see this beautiful big bird hit $2.70 by close of trade today.
Thanks Kiwigekko. You're not late to the party mate, its just getting started. I'm right at the very top of my maximum self imposed allowable 20% portfolio allocation, if it weren't for that I'd buy even more.

[KiwiGekko]

I've done some quick back of the envelope calculations on next year's EPS. By my reckoning $700m underlying profit before tax is on the cards, (about $500m after tax) and that's a whopping EPS of 45 cents per share !!!! I'd love to see this beautiful big bird hit $2.70 by close of trade today.

1) Out of interest, what numbers are you using for your oil prices & drop in yield as they ramp up new services / increased capacity? I understand the increase in capacity is the main driver for increased profits, I'm curious as to how much discounting people think might be involved in the short term to fill that capacity up?
2) It seems to have broken through $2.68, which has been resistance in the past so *fingers crossed* -- spoke too soon it just hit $2.70.

Cheers.

[Beagle]

Keep it quiet mate but I think talk of dropping regional fares is just window dressing to keep the public happy...they have to say something to make people feel happy because its still majority govt owned. That's why they made a meal of the $3billion they're investing in new aircraft in the next few years and $40m they're investing in lounge upgrades...to keep Joe public placated.
Sure there will be more night rider fares and some more specials on grabaseat but I like AIR's attitude as reported by Mod in the conference call that airfares are the same as they were ten years ago when fuel was this price and our other costs have gone up. AIR appears to be geared up to defend its prices against any left wing pressure.

Oil's the wildcard... to get to $700m underlying profit I'm assuming it stays around the current level...where it actually goes, who knows but what if circa $80 a barrel for Singapore Jet is the new normal for many years !!!
$2.70....next stop $2.75 bring it on !!! Look at the record volume in the market today...tells you its going north and there will be significant analyst upgrades coming through from brokers in the next few days so people that rely on that will add considerable further impetuous to this upward momentum. $3.00 soon ???

[KiwiGekko]

Keep it quiet mate but I think talk of dropping regional fares is just window dressing to keep the public happy...they have to say something to make people feel happy because its still majority govt owned.

No worries, its just between you, me & the internet. :p

Agree that they certainly seemed ready with information to defend any pressure from Joe public around air fares. I quite liked the emphasis placed on the amount of additional seats they're adding to the regional areas and that ultimately that will bring some lower costs per seat as a result. Will watch and see what happens with the SP - today has been a very good day for all AIR holder's - time to go have a beer I think. :t_up:

[IAK]

Many thanks Modandm, you're the man.

[Beagle]

[QUOTE=percy;561229]I do,I do,I do [feel as though I am marrying AIR] !!! lol.
And yes you and Forest were right!!!!!![QUOTE]

You could call that a fringe benefit for spending time with us in Chch and helping us with transport to / from the ASM last year....(some of our infectious enthusiasm rubbed off on you).
Isn't karma a beautiful thing, you help others and it comes back to you :)

P.S. Wow !! Over 5 million shares volume now and up to $2.74.

[KiwiGekko]

P.S. Wow !! Over 5 million shares volume now and up to $2.74.

*cough* $2.75 now. *cough*

[tzbang]

maybe mr market is finally waking up to AIR's value

[Beagle]

*cough* $2.75 now. *cough*

The beer is chilling off in the fridge waiting for market close :D
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11407446