It is a good sign that he believes in this company ... but lets face it - nobody, not even Greg Foran knows how travel, virus and war will play out over the years to come.
It might work out very nicely ... or it might not.
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Refuelled for recovery, Air NZ announces 2022 annual result
Refuelled for recovery, Air NZ announces 2022 annual result - NZX, New Zealand’s Exchange
2022 Financial summary
• Loss before other significant items and taxation of $725 million ,compared to $444 million in the prior year
• Statutory loss before taxation of $810 million
• Operating revenue lifts 9 percent to $2.7 billion, driven by Cargo performance
• Recapitalisation completed in May, raising $2.2 billion
• Liquidity of $2.3 billion as at 23 August
In a year of ongoing twists and turns, Air New Zealand has recapitalised its business and, in the last quarter, experienced greater than expected demand for travel, while managing rising costs and an ongoing pandemic.
The airline has today announced a loss before other significant items and taxation of $725 million for the 2022 financial year, consistent with guidance provided to the market in June. The statutory loss before taxation was $810 million .
Although the financial year ended strongly following the phased reopening of New Zealand’s borders from March, the airline’s operating revenue of $2.7 billion was significantly impacted by pandemic related travel restrictions.
Cargo and domestic revenues helped lift overall revenue by 9 percent, however high fuel prices and reduced flying over much of the year resulted in a loss for the period.
Air New Zealand Chief Executive Officer Greg Foran said the airline continued to be guided by a clear strategy, moving deftly to address continued change by focusing on doing the right thing for its stakeholders.
“For customers, we’ve been focused on restoring services, maintaining a choice of fares and launching innovations to improve their journey with us. For our amazing staff we have provided one-off awards to acknowledge their continued extra mahi, and for our communities we’ve been obsessed with operational performance, which drives the reliable services they depend on,” says Mr Foran.
“For our shareholders, whose support has refuelled the business for future growth, we’ve completed a successful recapitalisation that was structured to be fair to our shareholders, including those that didn’t take up the rights offer.”
Mr Foran said cargo revenue continued to be a major contributor to the company’s performance, up 32 percent to $1.0 billion. Additional flying under the New Zealand and Australian government airfreight schemes contributed $403 million of that revenue. With borders now largely reopened, the Australian scheme has ended, and the New Zealand scheme is tapering off and will cease by the end of March 2023.
Firmly in the ‘revive’ phase of the ‘survive, revive, thrive’ journey, Mr Foran says the current environment is one of strong bookings despite ongoing challenges.
When travel restrictions began to lift in March the company recorded a very strong recovery in bookings and revenues. This trend continues, with high booking levels through July and August. Corporate bookings are also encouraging and are trending closely towards pre-Covid levels.
Mr Foran referred to the airline’s mid-August schedule changes, which reduced seats by 1.5 percent through to the end of March 2023, as another example of doing the right thing for stakeholders.
“As we’ve been seeing overseas, travel demand is much stronger than anyone anticipated. But we’re operating in a very tight labour market with high fuel prices, tough economic conditions and the highest levels of employee sickness in more than a decade.
“Our rehiring efforts and training capability have been excellent, as has work to get our Boeing 777-300ER aircraft back flying again, but the experience for some of our customers and the impact on our front-line staff this winter has been unacceptable, so we’ve adapted yet again.
“Having adjusted our schedule to provide customers with increased surety over their travel plans for the coming spring and summer, I am hugely appreciative of the work the Air New Zealand whānau has done to deliver more than 25,000 flights across June and July alone.”
The airline also made investment decisions in support of its Kia Mau strategy. These include the plan to move the Auckland workforce to its airport campus, investment in a new hangar at Auckland airport and the decision to close its Gas Turbines business unit by the middle of the 2023 calendar year.
Air New Zealand Chair Dame Therese Walsh thanked Greg and the Air New Zealand team for a year in which the airline not only managed significant challenges but also introduced changes that will deliver improved services to customers and made progress on their long-term sustainability goals.
“The airline’s continued ability to step carefully through an ongoing pandemic while looking beyond the horizon is becoming a core capability. While introducing and then removing vaccination requirements for domestic travel, there have been preparations for our New York launch and the completion of designs for our new Boeing 787 Dreamliner cabin experience.
“For our AirpointsTM members there were more than 2,000 new products added to our AirpointsTM store as well as the introduction of Flexipay, so customers can enjoy even more online shopping options. I’m especially excited about our next generation app, which will give customers a more seamless travel experience when it rolls out in the coming months.
“In April we announced ‘Flight NZ0’, a programme to engage customers as we work towards net zero carbon emissions by 2050. We were the second airline globally to announce an interim science-based target to 2030 and continue to make progress on sustainable aviation fuel and zero emissions aircraft technology.
“Throughout the year we have also made improvements to the pay and conditions for our people, settling 12 collective employment agreements, increasing the base pay of our front-line workers and restarting incentive payments to staff on individual employment agreements ensure we retain our dedicated team.”
Dame Therese acknowledged the support the airline has received from its shareholders over the course of a challenging two-year period.
“From the Crown loan provided in the early days of the pandemic, to the airfreight support scheme that helped us keep connected to key export markets, to the $2.2 billion recapitalisation completed in May which allowed thousands of shareholders to take part in refuelling the airline for success. We have had significant support from all our shareholders and for that we are truly grateful.”
Strong liquidity position with dividend suspended
As at 23 August 2022, the airline has available liquidity of $2.3 billion, consisting of approximately $1.9 billion in cash and $400 million of available funds on the unsecured standby loan facility with the Crown. The cash balance includes $200 million of issued redeemable shares which the airline intends to redeem once our recovery is further progressed.
The Board does not expect to consider payment of dividends before the airline’s earnings substantially recover, and in the context of a supportive and sustained broader economic environment and recovery.
Outlook for 2023
With borders now open to the majority of the airline’s markets, Air New Zealand expects the 2023 financial year to represent the first full year of uninterrupted passenger flying since the beginning of the pandemic.
Total flying capacity for the 2023 financial year is expected to be in the range of 75 percent to 80 percent of pre-Covid levels. On this basis, the airline anticipates a significant improvement in financial performance relative to financial year 2022.
Given the degree of uncertainty regarding volatility in jet fuel prices, the risk of a global recession, and other macroeconomic factors including inflationary pressures on costs, no earnings guidance will be provided at this time.
Update
My NTA guess of 35 to 40 more than a year ago came in, do I get a chocolate fish?
Here's the revenue in advance issue I banged on about. 2022 $1.635B vs 2021 $689m disclosed on the balance sheet, Note 14 shows only $194m is loyalty scheme. We debated that on here and this number is way below all of us I think. My big issue is there is another cash crunch over the next 12 months. That revenue in advance is equal to all passenger revenue in 2022.
Current assets at $2497 Current liabilities at $3171. That is not good and is normally a sign that another cap raise is on the horizon.
so possibility of further sheep being taken for a ride to hoist the fusilage to a slightly more even keel ?
SP seems to have recovered a bit since the last CapRaise Wallet slaughter
Wonder how much longer and higher before the next 'empty the pockets' exercise lands ? :)
Still an amused spectator watching this airframe wreck spluttering across the skies ;)
Hopefully some of the loose debri doesn't make too much of a splash when it crashes
into a startled peacefully sleeping Robbo's soup bowl in front of him ;)
Dassets, whats your take on the cargo numbers and what will happen going forward? Up 32% to $1b but 40% of their income is the Govt scheme which is going to taper off in the next 6-7 months.
Will AIr NZ lose out once other operators start back flying into NZ with more capacity??
Had a crack at this company's FY22 accounts:
https://recastinvestor.substack.com/...-airnzx-aizasx
It should be pretty obvious that I despise this company.
But I hope forum members get some value out of it. Took quite a long time to do.
Cheers.
Hmm.
It is clear from this analysis that you are quite emotionally involved. I don't want to dispute the facts and issues and certainly not your emotions, but I am not sure, whether this analysis helps other investors to make sound judgement calls about the application of their funds.
It feels a bit like drawing conclusions on Christchurch's future by a detailled analysis of the rubble of the CTV building - if you see what I mean?
Looking at AIR - obviously, the last three years have been a disaster. I don't think however that it is legit to use them as a base for their future fortunes. You put as well a lot of emphasis on the mount Erebus disaster and the Ansett investment. Sure - they used to make mistakes on their journey, but so did others - and some of them do these days quite well.
I think the only things which count for AIR from here on are:
1) do they have (or can they get) the know how, the assets and enough funds to ramp up a successful airline rising out of the rubble?
2) How will the industry and the travel market change after (or with) Covid and with increasing climate change issues and can they adapt to the changes?
I am not sure I found an answer to these quesitons in the analysis.
Personally I think that Warren Buffetts advise not to invest in airlines was good ... I note however that Warren Buffett didn't follow his own sound advise :) ; It is probably like with all other things in life ... the correct answer is always: It depends.
“ Buy when there’s blood in the streets “
Most of us here on this forum are in the business of looking for opportunities to increase our wealth by way of the share market.
Like it or loathe it as a company, the AIR share price has always been cyclical.
If you had bought AIR when everything looked hopeless, and the share price was at a low ebb ( not necessarily it’s low) and sold when it had recovered significantly, (not necessarily at its high) there was money to be made. I have done this and it has been profitable.
It has however required time and patience, and as stated, reasonable timing.
I have started that process again recently.
DISC: I hold quite a few so I’m biased, I am not risk averse, and this is not advice.
Thanks for your very constructive reply. Great points, well made and appreciated.
I apologise that I went over the top on this company. It was unprofessional. You're right, it's very emotional.
As regards the two important questions you raise on 2) I think the surprise will be on the downside. Don't think travel will recover quickly if ever to the pre-Covid levels and 1) is dependent on 2) and don't think there's the capital in the company to endure a soft ramp-up.
Thanks again.
(Don't like to be pedantic but it's advice not advise).
That is a hard one. I think looking at the pax numbers and Auckland Airports that we will struggle to get a full recovery so we may not see the same operators and schedules. Long haul, and we are long, is problematic for some people. Carbon cost of flights is becoming a thing that drives where (some) people go. I think that european to NZ/Aust tradition could be paired back with maybe Aussi surviving with an Asian add on.
The freight is really interesting. It is pretty obvious we have a big issue in terms of vulnerability of key trade to transport disruption. On seafreight we appear to be losing schedule. For airfreight I believe the system we had has been shown to be flawed. Maybe AIRNZ/Govt has to think about a dedicated freight operation ie freight planes with a Pacific mandate focused on Aust/China/Japan. I mean what if Taiwan kicks off, we lose our belly space on pax aircraft for how long through Asia? Or SARS or or etc. And while we are at it maybe we need sea vessels that we can influence, hey Crazee Robo's Container-2-u Services. We need to bring in 8 ship loads of bitumen a year to put on our roads since Marsden Point no longer produces ir(as a by-product). What happens if we don't? We have big problem. Liquid fuels transport, critical to the economy so why don't we harden(protect) that capability. We actually have to, imo, secure our lines of communication(army slang for logistics routes) with the current state of affairs and the time to build ships. I welcome comment on those bombshells!!
Interesting discussion. I’m curious about your view that travel will not recover to pre-COVID levels. I’ve spent the last 3 months in northern Europe where I’m involved in a business heavily reliant on tourism. Accommodation in the country has been fully booked (yes that’s right) since early June and until late October, which is much further into autumn than normal. Visitor numbers are up about 10-15% on 2019. This has been helped by people from south Europe escaping the heatwave there. But people are back travelling flat out. Sadly NZ has already missed out due to stupid COVID response. AIR, AIA and the whole hospitality industry is on its knees as a result. Personally I’m not touching these companies as investments as I think NZ Inc has got a lot of work to do to recover. Meanwhile the rest of the World is rocketing ahead with tourism.
I was mainly referring to AIR and the asia-pacific. Don't know much about Europe.
An article today might be of interest:
https://www.1news.co.nz/2022/09/04/t...tcPGXmnS3uuBVU
At present I'm in Asia and in the country I'm in things are pretty dire. Many are having trouble meeting costs of day-to-day living. Violence on the rise.
Another issue is climate change. That's been explored ad infinitum.
As regards AIR demand is strong for a while. It's hard to ramp up supply. The demand is a balloon I think. Will fall later. AIR cancelling flights for various reasons.
Domestically the middle and lower classes are caught in an inflationary squeeze. Much travel is discretionary.
Some people are doing business differently without travelling to meet.
I believe the true horror of what the pharmaceutical and medical people have done to the general public with the Covid vaccines is slowly emerging. Ergo significant illness coming (only an opinion mind you).
Lastly, something odd is happening with energy. Just a feeling which followed Macron's recent comments on the 'end of abundance' made recently.