AIR - Air NZ.

**macduffy** · 31-03-2020, 11:09 AM

Foran is just being realistic. The govt wage subsidy is to keep viable businesses and employment intact. There are unemployment benefits for workers whose jobs disappear. Harsh, perhaps, but that's the situation that the airline sector's in at present.

**Beagle** · 31-03-2020, 12:10 PM

Originally Posted by stoploss

Beagle can you help me make the numbers work ? , $ 500 mio revenue , labour cost $110 Mio a month , lets say that is reduced to $ 75 mio ( just over 30 % reduction ) lease payments etc etc
Disc : short

Except from above link is below.
"Our monthly labour cost alone is $110m. We have $960m in cash reserves today, but with very little revenue coming in, our cash balance will fall by tens of millions of dollars each week." My estimate is about $60m -$70m per week.

According to CNBC this morning after 9/11, (which was a one-off event), demand did not return to normal for 3 years !

**winner69** · 31-03-2020, 12:23 PM

At least not spending much on fuel ...... shame it’s so cheap at the moment

**stoploss** · 31-03-2020, 12:31 PM

[QUOTE=winner69;803654]At least not spending much on fuel ...... shame it’s so cheap at the moment[/QUOTE
Be a few years to work off all the hedged stuff at this rate of flying , either that or a massive hit to cut the position out ....

**blackcap** · 31-03-2020, 12:33 PM

[QUOTE=stoploss;803659]

Originally Posted by winner69

At least not spending much on fuel ...... shame it’s so cheap at the moment[/QUOTE
Be a few years to work off all the hedged stuff at this rate of flying , either that or a massive hit to cut the position out ....

By my rough back of the envelope calcs about $300m NZD to cut the position.

**stoploss** · 31-03-2020, 12:34 PM

[QUOTE=blackcap;803660]

Originally Posted by stoploss

By my rough back of the envelope calcs about $300m NZD to cut the position.

that would be at 9% as well .........

**blackcap** · 31-03-2020, 12:43 PM

[QUOTE=stoploss;803661]

Originally Posted by blackcap

that would be at 9% as well .........

Well not yet.. they still have $1b in the bank minus a months worth of Opex say $300m. So $700m left in the kitty? That will go very fast though.

**peat** · 31-03-2020, 12:44 PM

so they are locked into buying fuel at pre Covid prices and they cant even use it??

Hard to believe , surely options on fuel would have been used.

**Arbroath** · 31-03-2020, 12:45 PM

I would advise against cutting the hedging position with oil at $20. Better to just work there way through it and maybe mix in some spot purchases in 2021 once they are hopefully using a bit more jet fuel again. Might take 2-3 years to use it all up but they will.
The key here is to have a decent size domestic service running (and being used of course) by August/September. In stable domestic conditions they can probably make $100m+ a year. The long haul flying has very poor yields compared to domestic.
At the end of the day its very hard to make a bullish case for AIR - this is 100% about survival and they will need to raise capital later this year at maybe 50c or so. Best case if they survive and if you can own them at less than $1 a share after recapitalisation you might stand a chance of making some money on a 3-4 year view. Worst case if its throwing good money after bad and it ends up 100% Government owned.