AIR - Air NZ.

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-websit...043/317650.pdf

Fuel hedge position is here. A lot depends upon the amount of flying after the lockdown as to how much of each quarters hedge position they can use.

Spot close out today would go to $250m net cost, based on Brent only. I haven't looked at Jet crack spreads but would have thought they would have come in heaps as well so the total extra cost they would be paying compared to spot Jet fuel could be close to the $300m another poster has suggested ?

https://www.nzherald.co.nz/business/...ectid=12320854
Excerpt "Chief executive Greg Foran is clear that it will become a domestic airline with limited international services. That's a reversal of where it all started nearly exactly 80 years ago - its forerunner, TEAL, launched with an international flying boat flight from Auckland to Sydney".

[BlackPeter]

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

<deleted> should have read the thread to the end before commenting ...

[Ecks]

AIR Net profit per FY NZ$m


GFC hit during the 2008 FY, took 4.5 years for AIR to recover, I think realistic expectation are 5 years for AIR to recover earnings and business confidence with P/E ~ 6 and share price ~ $2.

My expectation is a national owned airline as per the successful examples of Qatar and Emirates, it's the only logical way airlines can proceed in the future given the ever increasing regulatory environments.

My question to you all is what would happen to the minority share holders, the Mum and Dad investors that have already purchased shares at $0.90 due to FOMO, will they be forced to close their position after the government debt to equity swap giving the crown ~ 90% ownership and then takes the extra step of becoming nationalised? Would they simply offer let's say $0.25 per share and would it be the obligation of the shareholder to sell?

[blackcap]

AIR Net profit per FY NZ$m


GFC hit during the 2008 FY, took 4.5 years for AIR to recover, I think realistic expectation are 5 years for AIR to recover earnings and business confidence with P/E ~ 6 and share price ~ $2.

My expectation is a national owned airline as per the successful examples of Qatar and Emirates, it's the only logical way airlines can proceed in the future given the ever increasing regulatory environments.

My question to you all is what would happen to the minority share holders, the Mum and Dad investors that have already purchased shares at $0.90 due to FOMO, will they be forced to close their position after the government debt to equity swap giving the crown ~ 90% ownership and then takes the extra step of becoming nationalised? Would they simply offer let's say $0.25 per share and would it be the obligation of the shareholder to sell?

These things can get complicated. But if it got to a situation that without the crown AIR was no longer a going concern, well then the crown can give you 10 cents for your shares. Take it and get 10 cents. Leave it and get nothing. Really that simple. It is possible that the crown takes a larger equity stake before AIR fold (if they ever get there) and then there will be some theoretical fair value that is arrived at by debt and equity holders. Another scenario is that AIR use the crown loan, trade profitably, pay the crown back and no one gets diluted.

[Beagle]

Its not possible to trade profitably in FY20 or FY21 and very unlikely in FY22 either in my opinion.

My sense is we simply get a rinse and repeat of the last bailout that occurred after 9/11.

This time I expect the N.Z. Govt to end up with ~ 90% of the airline at ~ 25 cents and when the storm has finally passed they will look to do a sell-down again, just as per past practice.

Rinse and repeat whenever necessary in the future. Very hard for minority shareholders to win and get a feed in the long run when each year the senior staff eat like its a banquet, The Govt clean up moist of the scraps in PAYE, GST Taxes, and dividends and minority shareholders are literally left with crumbs.

[Ecks]

Currently fair value would be $0.50, once their cash reserves have been exhausted and debt with the government all but used (expected to happen by end of Q2) I think we could see AIR reach this fair value and 6 months from now the government exercise their clause to swap debt to equity at half the fair value, lets say $0.25. This is all speculative but the only logical path I can see, just a shame you can't short the market in NZ. I think it's unlikely AIR attempts to raise capital from shareholders already on their knees given the economic environment due to Covid19. Q3 is going to be interesting, you would need to be brave to jump into AIR today, now's not the time to buy.

[BlackPeter]

AIR Net profit per FY NZ$m


GFC hit during the 2008 FY, took 4.5 years for AIR to recover, I think realistic expectation are 5 years for AIR to recover earnings and business confidence with P/E ~ 6 and share price ~ $2.

My expectation is a national owned airline as per the successful examples of Qatar and Emirates, it's the only logical way airlines can proceed in the future given the ever increasing regulatory environments.

My question to you all is what would happen to the minority share holders, the Mum and Dad investors that have already purchased shares at $0.90 due to FOMO, will they be forced to close their position after the government debt to equity swap giving the crown ~ 90% ownership and then takes the extra step of becoming nationalised? Would they simply offer let's say $0.25 per share and would it be the obligation of the shareholder to sell?

There is no requirement for the government to nationalize, but if we assume that their holding goes up to 90% due to CR's, than I guess the remaining shareholders deserve to be paid only a small amount per share given that they obviously didn't contribute to their company fighting for its life.

Still would expect that whatever they offer is a fair representation of the NTA at that time, but this might not be a lot.

So - lets see, current NTA for AIR is $1.63 per share. I assume that most of that are planes which won't hold a lot of value if nobody needs them. Say discounted NTA is half of the initial number - i.e. 81.5 cents.

If you assume that the state holds 90% of shares (instead of currently 50%), then this means that the state must have roughly quadrupled their holding with the reminder of the shareholders sitting at the sidelines and asking the taxpayer to bail out their company, i.e. number of shares would be 2.5 times what it is now.

Assuming the bailout is to cover the mess they are in (i.e. not increasing the NTA), than the new discounted NTA of the AIR shares would be roughly 32 cents.

Well, yes - this is probably close enough to what you proposed. Sounds like a fair offer to you?

[Ecks]

Its not possible to trade profitably in FY20 or FY21 and very unlikely in FY22 either in my opinion.

My sense is we simply get a rinse and repeat of the last bailout that occurred after 9/11.

This time I expect the N.Z. Govt to end up with ~ 90% of the airline at ~ 25 cents and when the storm has finally passed they will look to do a sell-down again, just as per past practice.

Rinse and repeat whenever necessary in the future. Very hard for minority shareholders to win and get a feed in the long run when each year the senior staff eat like its a banquet, The Govt clean up moist of the scraps in PAYE, GST Taxes, and dividends and minority shareholders are literally left with crumbs.

Brilliant response! Thank you and appreciate your answer blackcap, if you guys don't mind i'll be sticking around - day 1 of joining the forum!

[Beagle]

Brilliant response! Thank you and appreciate your answer blackcap, if you guys don't mind i'll be sticking around - day 1 of joining the forum!

Welcome to the forum. Unsurprisingly the unions have a different view. Pretty safe to say if you're the head of the airline pilots association and a Dreamliner pilot, (probably making north of $300K) they see it differently. https://www.nzherald.co.nz/business/...ectid=12321283

[Beagle]

There is no requirement for the government to nationalize, but if we assume that their holding goes up to 90% due to CR's, than I guess the remaining shareholders deserve to be paid only a small amount per share given that they obviously didn't contribute to their company fighting for its life.

Still would expect that whatever they offer is a fair representation of the NTA at that time, but this might not be a lot.

So - lets see, current NTA for AIR is $1.63 per share. I assume that most of that are planes which won't hold a lot of value if nobody needs them. Say discounted NTA is half of the initial number - i.e. 81.5 cents.

If you assume that the state holds 90% of shares (instead of currently 50%), then this means that the state must have roughly quadrupled their holding with the reminder of the shareholders sitting at the sidelines and asking the taxpayer to bail out their company, i.e. number of shares would be 2.5 times what it is now.

Assuming the bailout is to cover the mess they are in (i.e. not increasing the NTA), than the new discounted NTA of the AIR shares would be roughly 32 cents.

Well, yes - this is probably close enough to what you proposed. Sounds like a fair offer to you?

I think its extremely unlikely that s single tranche of $900m support gets them right to the other side of this where the airline is profitable again.