AIR - Air NZ.

[nztx]

The company needs to raise capital (equity) soon.

Very basic set of analyses:

Interims to 31 December, 2021

https://recastinvestor.substack.com/...zealand-airnzx

Annuals to 39 June, 2021

https://recastinvestor.substack.com/...zealand-airnzx

Feedback welcome :-)

A few further comments:

Forget creative deferred tax movements (in fact any tax) in P&L for this basket case
Net Profit before tax is a more appropriate measure of performance
in current times.

Fixed Assets should be valued at their fire sale values in the
current economic & global climate - that is values near to what
a Liquidator would see as realisation values

Impairment provisions to bring down to their Fair Value may be
substantial.

It's surprising that SHF for 2021 were $811M

They probably wouldn't be that now - adjust for reversing back out creative
deferred tax ($53m) , further months & months of travel carnage, fuel increases,
wage increases, Covid, Omicron possible derivatives unfavourably moving etc etc

It wouldn't surprise if the $800 m odd was all but evaporated by the time
CR comes along - what sort of SP true value does that suggest ?

No sense in Directors or the Company trying to further pull the wool
over the public & investor's eyes - the situation is indeed grim.

No amount of white washing can change things IMO

[Beagle]

Wonder how many hundreds of millions extra per annum in fuel costs with the recent explosion in fuel prices ?
I can't be bothered going too deep on this any more....anyone thinking rationally about it should be able to see the capital raise is just a non tax deducible donation and if they can't see what they're looking at jumping into they should be taking professional advice.

[Recaster]

Great points. Thanks. Not that familiar with deferred tax - I need to brush up on that. If you take out the tax credit it's not a pretty picture for just 6 months of operation. A indirect cash flow statement reconciling profit to operating cash flow would have been quite revealing.

Based on your comments the company must be nearly insolvent if not insolvent. Perhaps $1.2 bn will be no where near enough. They've got an NZ govt 'put' though :-)

[Beagle]

Been a while since this aging bean counter looked at the rules around deferred tax but in essence if my memory serves me correctly you're only allowed to recognize a credit if there's a realistic chance the benefit of these losses can be realized in the foreseeable future, or words pretty close to that effect. But what year does anyone think AIR will be profitable again and in a position to utilize the value of prior years tax losses ? I don't see how anyone with a straight face could say they'll be profitable any year soon ?

To me "Revive and thrive" looks like nothing more than a creative B.S. marketing phrase to try and sell the recovery to some of the gullible public. In my opinion that's analogous to the disingenuous way promotors of My Food Bag extolled naïve investors to "Tuck In" Look how that's worked out for them ! They've lost half their money....and I'd say AIR investors would be very fortunate indeed if over time, they escaped with a similar outcome.

In my opinion if you want an almost sure fire way to get seriously kicked in the head financially, rock up and fill ya boots with AIR shares tomorrow and take up your full entitlement to the capital raise in due course.

[Waltzing]

Could see some big air freight increases but that will likely be passed on to everyone using the services of of Air freight.

Just got a bill for parts from Italy, 50 EU part , 250 NZ for Air freight. Parts weight almost Nothing and pretty small package..

[Recaster]

Thanks for the comments! Just on the subject of deferred tax wouldn't it be better to record them as contingent assets or liabilities as the case may be? Take them off the balance sheet and put them in the notes to the accounts in other words.

[BlackPeter]

Wonder how many hundreds of millions extra per annum in fuel costs with the recent explosion in fuel prices ?
I can't be bothered going too deep on this any more....anyone thinking rationally about it should be able to see the capital raise is just a non tax deducible donation and if they can't see what they're looking at jumping into they should be taking professional advice.

beagle, fully agree re your assessment of AIR.

Only thing I would like to point out that for a trader any contributions to AIR's CR would be in my view fully tax deductible. Why do you think any trader would not be allowed to deduct their AIR incurred losses from their income and therefore pay less overall tax?

Obviously for any investor (not subject to capital gains tax) as well as for traders on lower tax rates than 33% the situation would be more complicated and a donation to the local church or welfare organisation within the defined limits of the tax law more sensible ... IF tax deductibility is one of the drivers of the donation.

[Muse]

Been a while since this aging bean counter looked at the rules around deferred tax but in essence if my memory serves me correctly you're only allowed to recognize a credit if there's a realistic chance the benefit of these losses can be realized in the foreseeable future, or words pretty close to that effect. But what year does anyone think AIR will be profitable again and in a position to utilize the value of prior years tax losses ? I don't see how anyone with a straight face could say they'll be profitable any year soon ?

To me "Revive and thrive" looks like nothing more than a creative B.S. marketing phrase to try and sell the recovery to some of the gullible public. In my opinion that's analogous to the disingenuous way promotors of My Food Bag extolled naïve investors to "Tuck In" Look how that's worked out for them ! They've lost half their money....and I'd say AIR investors would be very fortunate indeed if over time, they escaped with a similar outcome.

In my opinion if you want an almost sure fire way to get seriously kicked in the head financially, rock up and fill ya boots with AIR shares tomorrow and take up your full entitlement to the capital raise in due course.

You can only record on balance sheet tax losses that the accountants & auditors agree have a realistic chance of being utilised over some period of time. But off balance sheet tax credits are still available for use in the future regardless if they are on the balance sheet or not.
One thing to consider though is the potential loss of tax credits from changes in shareholder continuity. If there is a turnover of more than 50% of shares in a year then the credits will be lost.

[Beagle]

You can only record on balance sheet tax losses that the accountants & auditors agree have a realistic chance of being utilised over some period of time. But off balance sheet tax credits are still available for use in the future regardless if they are on the balance sheet or not.
One thing to consider though is the potential loss of tax credits from changes in shareholder continuity. If there is a turnover of more than 50% of shares in a year then the credits will be lost.

Thanks mate, its good to have another bean counter on here to confirm my understanding. There could be some frank discussions between the auditors and management this year !

[Beagle]

beagle, fully agree re your assessment of AIR.

Only thing I would like to point out that for a trader any contributions to AIR's CR would be in my view fully tax deductible. Why do you think any trader would not be allowed to deduct their AIR incurred losses from their income and therefore pay less overall tax?

Obviously for any investor (not subject to capital gains tax) as well as for traders on lower tax rates than 33% the situation would be more complicated and a donation to the local church or welfare organisation within the defined limits of the tax law more sensible ... IF tax deductibility is one of the drivers of the donation.

Agree regarding traders but I think their tax deductible donation would be better off directed towards a more worthwhile cause. I am sure the Red Cross are doing fabulous work in Poland at the moment.