I think Air NZ will have to update guidance soon. Air NZ made earnings before significant items and tax of $198 m in H1 and are forecasting $300 m to $350 m for the full year i.e. $102 m to $152 m in H2 after allowing for $35 to $75 m hit from Coronavirus. Assuming they made $66 m in Jan/Feb (based on same monthly run rate as H1), then they will need to make $36 m to $86 m in the last four months of the financial year in the midst of the Coronavirus impact to achieve guidance. I forecast that they will make a loss in H2 (assuming capacity reduction of 10%, load factor declining to 70% and a 3% decrease in revenue yield per RPK from March through June), which would be massively different to current guidance. Could easily be losing $1m+ per day in last 4 months of the financial year.
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!
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 ...
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"Prediction is very difficult, especially about the future" (Niels Bohr)
I think Air NZ will have to update guidance soon. Air NZ made earnings before significant items and tax of $198 m in H1 and are forecasting $300 m to $350 m for the full year i.e. $102 m to $152 m in H2 after allowing for $35 to $75 m hit from Coronavirus. Assuming they made $66 m in Jan/Feb (based on same monthly run rate as H1), then they will need to make $36 m to $86 m in the last four months of the financial year in the midst of the Coronavirus impact to achieve guidance. I forecast that they will make a loss in H2 (assuming capacity reduction of 10%, load factor declining to 70% and a 3% decrease in revenue yield per RPK from March through June), which would be massively different to current guidance. Could easily be losing $1m+ per day in last 4 months of the financial year.
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
Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Beagle, have to say, you called this one early and took a position based on your conviction. Impressive. It took me a while to get it. I was focused on the 10 year return to normal view and not quick enough to grasp the implications of the short term being so brutal, especially given the weak balance sheet.
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
Last edited by Beagle; 07-03-2020 at 08:08 PM.
Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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.
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.
This has been by far my most profitable trading share on the NZX over that time although have to be on it at all times, if on holiday I simple exit it...
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.
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Originally Posted by Mogul
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