AIR - Air NZ.

[kiora]

Ah hum
What a booper AIR
A FB message I just received
"Wtf?
Air NZ “can’t afford” to pay out refunds but can afford to buy a good food producing farm (and a rather spectacular one at that) to blanket plant in pine trees to mitigate their carbon footprint.
Please like, share or do what you can to highlight this unbelievable, unacceptable and inconsistent action of Air NZ and their banking syndicate (and shareholders) who fund and support such ill conceived mitigants.
I’m looking for 500 likes and 500 shares. Surely you are as incensed as me and many others!
And if you haven’t done so already please check out www.50shadesofgreen.co.nz - you may feel motivated to make a donation which will help us bring more awareness to the concerns of many NZers. When good food producing land is at the crux of NZ’s survival (health) and revival (economy), it must not be blanket planted in pine. 70,000 ha already since OIO relaxation, Carbon speculation and removal of steeper country from allowable planting areas all collided to cause what’s happening now"

[Stranger_Danger]

Beagle you have had your nose in the weeds and missed the big changes.



What effect will the end of social distancing on flights have on Air NZ's load factor and profitability? I would say HUGE.

What effect will a COVID free NZ have on business and leisure travel demand? I would say HUGE.

Combined, Air NZ could have a profitable NZ domestic operation at something like 60-70% of its former capacity as early as July. Justifies a share price increase wouldn't you say?

They are both valid points.

To those I would add :

What effect will fuel hedge losses and aircraft lease negotiations have on their profits and financial position?

When will the rights issue happen and at what price?

What impact will competitors having a price war to generate precious cashflow have on an industry with already marginal economics?

How much of the Government loan will be called on, and what impact will this debt have on decisions other lenders make about future borrowing capacity?

What will be the impact on culture and efficiency of 4,000 people or whatever it is leaving the business when it comes to those that are still there?

Has any permanent brand damage been done with the refunds policy?

How many of the early flights will actually generate new cash rather than using up previous credits, given that cash expenses will be created by each flight?

I could go on.

There are positives, you are correct. I can see why people are comparing the next 3 months favourably against the last 3 months. But if you look at the bigger picture, you have a financially weakened company, with shell shocked staff, less customer goodwill, more debt, the potential for cutthroat price competition, consumers probably looking to be more frugal in a recession, all sorts of political intrigue in an election year, and you have all of this in an industry which is economically marginal at the best of times.

As a gambling chip you may get to sell higher to a bigger idiot? Sure. As a long term investment, at the current price, against the likely background going forward? Madness.

[Baa_Baa]

It, the share prices exuberance, does look like madness.

I was reflecting on the Jetstar pricing of their return to market, wondering if their parent sees this as an opportunity to loss lead their way into a long term gain in market share?

They certainly have much deeper pockets than air and are not as financially distressed.

[percy]

You must spread some Reputation around before giving it to Stranger_Danger again.

[k14]

Did anyone see Cam Wallace on Fair Go tonight explaining themselves? He re-stated the $100m cost of repayment to the customers. Going back a few pages there was debate over this number. Just seems way too low (I think they stated over 100k customers having credit)? If it is right, and $100m will break the bank, then Air NZ really are well and truly in the crap.

[Jaa]

Bravo, finally someone who wants to engage rather than look at past dog poo or whine about non-refundable flight credits. Most of what you state is now well understood by the market.

They are both valid points.

To those I would add :

What effect will fuel hedge losses and aircraft lease negotiations have on their profits and financial position?

More flying will see Air NZ eat into those fuel hedge losses faster. +ve
Lower fuel prices in the medium/long term +ve
Supply/demand dynamics will see Air NZ will hold the upper hand in any lease negotiations +ve


When will the rights issue happen and at what price?

A pro rata rights issue won't affect current shareholders so much if they take up their share and/or sell their rights. - Neutral to -ve
A rights issue and/or just a profitable domestic network will allow Air NZ to raise debt and not have to use the government facility. Just as Qantas did. +ve


What impact will competitors having a price war to generate precious cashflow have on an industry with already marginal economics?

What price war? No evidence of one yet. Rather the opposite, airline fares are at historic highs due to diseconomies of scale +ve

How much of the Government loan will be called on, and what impact will this debt have on decisions other lenders make about future borrowing capacity?

The Government loan's availability makes Air NZ more investable not less. Even if as above they don't use it. +ve

What will be the impact on culture and efficiency of 4,000 people or whatever it is leaving the business when it comes to those that are still there?

The effect will be less than the galvanising and efficiency gains crisises tend to produce. Some efficiency gains like training customers to check-in themselves on their mobile phones will produce long term gains. +ve

Has any permanent brand damage been done with the refunds policy?

Overblown. I have always booked non-refundable tickets and had to burn a few in my time. Those are the risks and no one ever offered me a credit. Air NZ have moved to make the credits more flexible and access will improve with the online system. Other airlines are no better if not worse. All will be forgotten by 2021. - Neutral

How many of the early flights will actually generate new cash rather than using up previous credits, given that cash expenses will be created by each flight?

This is a fair point and will be a drag on the turnaround. -ve

Now consider the other positives, some of which I posted a few days back.

More wage subsidies ($37m), reduced government fees for aviation, lower wages, lower fuel prices, lower lease costs, reparation flights, cargo flights, increased cargo prices, heavy domestic tourism promotion, NZers travelling domestically rather than internationally and a Tasman and Pacific bubble on the horizon. All this before a vaccine or testing/treatment advances.

[Scrunch]

Enjoy your temporary unrealised gains while they last. The market in regard to airline stock won't stay in "Alice in Wonderland" for too long. Reality will bite and when it does it will bite very hard.

Quite possibly, but the NZ market has also shown it can keep the price of a market darling well above what analysts and others think is sensible. This situation can be maintained for years and years. For example lets consider the Port of Tauranga. They have only had two surplus's over $100m (but one of these involved abnormals and was in 2013). However, since October 2017 the market cap's been over $3b ($4.41) for a PE of >30x. Even during the recent march meltdown the price only fell to $4.90 (for a market cap of $3.3b). While the share price has been as high as $8, the mean market consensus as per market screener has had a maximum of $4.79 (and the highest target price of anyone has been $5.47).

The relevance to Air? - If the market can fall in love with a port, could it fall in love with an airline and keep Air's price in the stratosphere for years?

[BIRMANBOY]

Looking back in this thread to late march early April when the SP was 80 cents general consensus was bleak indeed. Since then SP has steadily climbed back up to todays price 1.78. The cries of "madness" have been steady and un-relenting. I thought this was supposed to be a traders forum lol...did anyone do any trading or did you all just buy into the cheerleaders prognostications and sit on your hands? Just Curious

[Baa_Baa]

Looking back in this thread to late march early April when the SP was 80 cents general consensus was bleak indeed. Since then SP has steadily climbed back up to todays price 1.78. The cries of "madness" have been steady and un-relenting. I thought this was supposed to be a traders forum lol...did anyone do any trading or did you all just buy into the cheerleaders prognostications and sit on your hands? Just Curious

Some people are long and have no clue about where or when to close out

Some people are short and have no clue about where or when to close out

There are some who have done nothing and are bewildered confused and still do nothing

There are others who see upside while others see downside, but still do nothing

The majority I suspect are on the sidelines intrigued by the spectacle that air is

Confounding confusing but not engaged. They are the safest

This is a disaster in the making only propped up by the government long.

Which will if it eventuates kill off all the small holders, but not necessarily benefit the shorts

[RupertBear]

You must spread some Reputation around before giving it to Stranger_Danger again.

yes I got the same message, thanks for your post Stranger Danger