AIR - Air NZ.

[Beagle]

I like the look of the new A321's and with the new engines they should be the perfect aircraft for Air's short haul pacific work.
I suspect they'll opt for more than the 3 out of 13 being the new A321.

[Robomo]

I suspect the A321's will be fitted out with a few business class seats and used mainly for AKL-SYD and AKL-MEL where there is sufficient business traffic to justify business class. Three planes would just about do it on current scheduling but I guess AirNZ will monitor the possibility of including Brisbane as well before commiting to more than 3 A321's.

AirNZ already use the larger twin-aisle planes (777 and 767 and probably 787 in the future) for some MEL and SYD and BNE flights so A321 with business class would ensure class commonality regardless of aircraft. Qantas and Emirates and Virgin all have some business class in all their trans-tasman flights so AirNZ would like to compete for that traffic on all flights.

On the above basis I'm picking that Air NZ will eventually settle for 4 A321's, all with a few business class seats.

[Beagle]

http://www.nbr.co.nz/article/satelli...ndustry-157804

Anyone else noticed how much quicker these new "smart" approaches to N.Z. airports are ?

I presume they're talking about installing new differential GPS systems, (http://en.wikipedia.org/wiki/Differential_GPS), which are state of the art and will allow far more accurate aircraft movements than the really antiquated radar systems presently in use that my brother used to maintain.

In other news Air increases its holding in Virgin to the maximum allowable 25.99% today.

Lots of good incremental improvements for this stock and trading on a really cheap forecast PE of only 8.3 times June 2014 earnings.
( Forecast $300m / 1,111m shares = 27 cents eps, $2.25 / 0.27 = 8.33)

[Lost in space]

http://www.nbr.co.nz/article/satelli...ndustry-157804

Anyone else noticed how much quicker these new "smart" approaches to N.Z. airports are ?

I presume they're talking about installing new differential GPS systems, (http://en.wikipedia.org/wiki/Differential_GPS), which are state of the art and will allow far more accurate aircraft movements than the really antiquated radar systems presently in use that my brother used to maintain.

In other news Air increases its holding in Virgin to the maximum allowable 25.99% today.

Lots of good incremental improvements for this stock and trading on a really cheap forecast PE of only 8.3 times June 2014 earnings.
( Forecast $300m / 1,111m shares = 27 cents eps, $2.25 / 0.27 = 8.33)

Thanks for that Roger. I'm contemplating buying in. Could I kindly piggy back on your undoubted research on this stock and comment on what the average industry PE is - particularly those few airlines that are providing adequate returns on equity? Thanks in advance.

[modandm]

http://www.nbr.co.nz/article/satelli...ndustry-157804

Anyone else noticed how much quicker these new "smart" approaches to N.Z. airports are ?

I presume they're talking about installing new differential GPS systems, (http://en.wikipedia.org/wiki/Differential_GPS), which are state of the art and will allow far more accurate aircraft movements than the really antiquated radar systems presently in use that my brother used to maintain.

In other news Air increases its holding in Virgin to the maximum allowable 25.99% today.

Lots of good incremental improvements for this stock and trading on a really cheap forecast PE of only 8.3 times June 2014 earnings.
( Forecast $300m / 1,111m shares = 27 cents eps, $2.25 / 0.27 = 8.33)

Not sure where you have got this number from - it looks too high and wrong to me. Its also well above consensus. Given we are so close to the end of the year I very much doubt the market is so wrong. The 2015 number on the otherhand - well it all depends on the assumptions you make...

Regarding your looking at PE ratios of competitors I would be cautious. Different tax treatments towards depreciation, stages of the cycle, leverage, and underlying exposures mean such comparisons are not useful imho.

Anyway I agree the stock is attractive.

[Arbroath]

Not sure where you have got this number from - it looks too high and wrong to me. Its also well above consensus. Given we are so close to the end of the year I very much doubt the market is so wrong. The 2015 number on the otherhand - well it all depends on the assumptions you make...

Regarding your looking at PE ratios of competitors I would be cautious. Different tax treatments towards depreciation, stages of the cycle, leverage, and underlying exposures mean such comparisons are not useful imho.

Anyway I agree the stock is attractive.

They said at the half year "normalised earnings pre-tax to exceed $300m" which is different to NPAT. I'd guess NPAT will come in around $240m which puts them on a PE of about 10.5 for this year.

It is very difficult to get too precise with 2014 earnings, let alone next year, as there are so many moving parts in the airline business. Although they've been doing really well and are in a somewhat virtuous cycle of being able to invest in more fuel efficient planes to increase margins and/or keep their foot on QAN's throat on the Tasman routes at the end of the day this is still an airline = notoriously hard industry.

I bought in around the Govt sell down level but feel anything around $2.50 they are getting expensive - forward PE of 9 when all the stars are aligned could be just the time to lighten the load and look for better value elsewhere.

[Beagle]

Thanks for that Roger. I'm contemplating buying in. Could I kindly piggy back on your undoubted research on this stock and comment on what the average industry PE is - particularly those few airlines that are providing adequate returns on equity? Thanks in advance.

Chairman Tony Carter says that with stable fuel prices and a traditional
seasonal earnings pattern of a stronger first half, Air New Zealand expects
to deliver a full year result of normalised earnings before taxation in
excess of $300 million.

Extract from half year profit announcement.

Sorry gents I got it wrong on the after tax PE front, as you were gentlemen. Working on say $250m aftter tax, (say $320m x .78), 22% was actual tax rate for first half, EPS = 22.5 cents = PE of 10. Looking at other airline PE's my gut says its not unrealistic to expect some PE exapansion as AIR continues to build credibility with its fresh and efficient fleet and excellent service level's.

I know airlines are a notoriously cylical industry but when you look at the average PE on the N.Z. market overall and the PE of other airline stocks I referenced earlier in the thread its incredibly hard to find value elsewhere and provided there's not a sustained oil price increase off the back of world-wide geo-political events I'm looking for a rally towards $3.00 this time next year

Its hard to get reliable directly comparable data, (no point looking to Qantas for PE comparitives).

[forest]

provided there's not a sustained oil price increase off the back of world-wide geo-political events I'm looking for a rally towards $3.00 this time next year

Its hard to get reliable directly comparable data, (no point looking to Qantas for PE comparitives).

Roger, I think that even in the case of sustained oil price increases AIR might do just fine. An increase in oil prices will be felt more by airlines with inefficient planes. AIR very efficient planes might become even more competitive when oil rises in price.

[Beagle]

Roger, I think that even in the case of sustained oil price increases AIR might do just fine. An increase in oil prices will be felt more by airlines with inefficient planes. AIR very efficient planes might become even more competitive when oil rises in price.

They certainly are well positioned mate.. I think everyone has been caught by surprise by these radical ISUS extremists in Iraq, (hopefully the tide will be turned with some well placed Tomahawk cruise missles and a few dozen repositioned military drones as well as the Iraq military actually showing a back-bone).
I guess the risk is if these extremists can impeed the flow of the 3.5 million barrells per day coming out of southern Iraq we'll see a sustanied imbalance in the demand supply equilibirum for oil.

Air N.Z. have some useful fuel hedges and collars in place but out into the second half of 2015 not so much.
How the public would react too fuel surcharges again, if necessary, I'm not sure to be honest ?
I think by and large people accept fuel surcharges as long as they're perceived to be necessary and reasonable, what do you think ?

[Marilyn Munroe]

There are an awful lot of idle underutilised A320's in the Near Abroad.

Be a shame if they were to used to undercut Cullen Airlines profitable cross-ditch routes because cut throat pricing would cash flow better than paying penalities for returning them to the leasing company.

Boop boop de do
Marilyn