Airlines heading towards worst year for long time ...and it’s only March
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Airlines heading towards worst year for long time ...and it’s only March
I think people have already decided en-masse to not choose to make new airline bookings unless its absolutely necessary for business purposes.
Younger travellers less at risk might still choose to make new discretionary leisure bookings if the price is right but the real wealth lies with the baby boomer generation who are most at risk so there's likely to be a lot of empty seats towards the front of the plane.
Was listening on CNBC this morning to the multi billionaire that owns the Houston Rockets and chains of hundreds of restaurants around the world as well as hotel and casino interests. He said he lost ~ $1m a day this week on his restaurants. He likened them to the airline industry with very high fixed overheads. "Once you lose just 20% of your customers for a sustained period of time you go broke".
AIR's average load factor has been about 83%. 20% off that is 66% and I would think with that load factor on a reduced level of services, their losses would be more than $1m a day. If that survey is indicative of forward intentions towards travel world-wide, there's very, very serious trouble ahead for all airlines.
Opps indeed. Another problem is the vast number of staff making $250K plus https://www.youtube.com/watch?v=3JxSLnvxP0w
No surprises here. We have always known that airlines was about the riskiest sector on all exchanges.
Air New Zealand Sells London Heathrow Airport Slot For $27 Million (Published on Mar 6 2020)
https://www.forbes.com/sites/willhor...o#73519e1c763d
I agree, though I would think your assumptions re capacity reduction still quite optimistic. You are modelling a roughly 25% reduction of flight traffic. Lufthansa just cut 50% of their flights!
https://www.theguardian.com/business...-travel-sector
Obviously - nobody knows yet how long the virus scare keeps going, but I'd think something like 6 months (our winter half year) with 50% capacity and after that some ramp up again might well be in the cards.
Better expect a red FY2021 as well ...
At any one time they have 2-3 months worth of flights pre-booked so these booked before this virus turned really scary will see them doing sort of okay in March and April, maybe scratching to break even for those two months. (I predict a lot of people won't turn up for their scheduled travel). Things get VERY ugly from May onwards in my opinion and I agree, this probably drags them down into a loss for 2H.
I think its highly likely they'll be looking for substantial new capital before the end of 2020. Realistically the only way to get this will be a deeply discounted rights issue with very clear implications for the current share price. I hope shareholders enjoy the dividend payable shortly, its probably their last one for the foreseeable future. This is uninvest-able at present, unless you are short :D
Meanwhile, across the Tasman https://www.smh.com.au/business/comp...y+7+March+2020 Its pretty ugly there too.
I’m picking that on Monday we will have a much clearer picture of where Air NZ is at.
Thanks mate. A case of once bitten twice shy. I was slow exiting last time this quickly lost altitude so have made a point of sitting very close to the emergency exit and having a parachute, ever since :)
One has to feel a bit sorry for Greg Foran. What a brutal introduction into the industry :eek2:
AIR have been in an earnings recession for years now ....so what’s new
AIR they say is cyclical, I posted a monthly chart recently to try to illustrate. Didn't get much feedback on it, perhaps because the up/down of pre-2012 had a predictability about it (20 month cycle), whereas after that the SP just chewed up three cycle period upwards ending at $3.61 (very close to the third cycle period end - spooky).
Since then the next 20-month cycle down period, has been followed by the current period, also down. So maybe there is a new super-cycle 5-years period. If so, I have technical supports at $1.82 (the .618 fib), $1.72 the recent low, $1.32 (horizontal support and .786 fib), below that is the 2012 low $0.72.
Who knows what all the factors are the make a sector cyclical (and company), TA doesn't help with the 'why' question, but one thing is for sure, this cycle is down, ending October 2020. If it really is now 5-year cycle (currently down), the sub $1 SP is in play.
Hard to believe I bought into AIR in 2012 with great expectations, sold a few years later for a very nice profit then rued not holding as it went to well over $3. Nowadays I couldn't stomach getting back into a gut churning flight on AIR unless it plumbed the depths and presented an opportunity too good to ignore.
Earnings are very cyclical as well baabaa - repost of chart from a few days ago
Profits declined for 5 years in a row 07 to 12 ….grew 4 years in a row to 16 ...and its been downhill ever since with 4 years of decline ...and probably more to come and possibly heading back to 2010 levels.
I reckon youd have to say that 2016 was so exceptional that it should be called an outlier and a number never to be repeated, Exclude that and EPS has average 20 cents over the last 14 years.
The only thing that has kept the share price up is the seductive power of a high yield.