AIR - Air NZ.

[Fortunecookie]

Bit more on the engine parts shortage..

https://fortune.com/2023/03/09/airpl...travel-season/

Thanks for the article. It's quite interesting.
I think it will help with load factors.

Using 2019 as the baseline and all of this is off the top of my head.
Total passenger numbers 17,700,000
Average load factor across all routes 85%

17,700,000/0.85% =20,823,529 total seat capacity
20,823,529- 17,700,000= 3,123,529 idle seat capacity

So what happens when you reduce flight numbers. Load factors go up on the remaining flights and eliminate cost on flights that have been withdrawn.
Of course this affects only certain routes and timeframe. But the principle is the same. As mentioned, "Most of the affected passengers will have their flights moved within 90 minutes of their original departure, although around 4000 people will have their flights moved "a day either side." Subsequent routes will be affected as mentioned.
Domestics make 66% of revenue and they control 80% of the market. 22% of revenue is from shorthaul (aus and PI). So the majority of the idle seats will accommodate this.
So seat supply has reduced, but I wouldn't be surprised if load factors go up on remaining routes.

I have used 2019 as the baseline as profit was at the bottom end of the downward cycle. They don't need to do anything extraordinary to achieve it.

[Sideshow Bob]

https://www.nzx.com/announcements/410480

Air New Zealand previously provided full year earnings guidance to the market at its 2023 interim results announced on 23 February 2023. Since this time, the airline has continued to experience strong levels of demand on both the domestic and international networks. US dollar jet fuel prices have also declined below those assumed in the earnings guidance provided in February 2023, although the New Zealand dollar has also weakened over this time, reducing the impact of these declines.

The improvements in revenue and jet fuel price are expected to be partially offset by softer cargo revenues due to increased competitive capacity, particularly in Asia, impacting yields and load factors.

The airline’s network capacity expectations for the second half of the financial year remain largely unchanged from the February guidance, with approximately 95 percent of domestic and 80 percent of international pre-Covid capacity levels across the network.

On the basis of the updates above, and assuming an average jet fuel price for the remainder of the 2023 financial year of US$95 per barrel, the airline now expects earnings before other significant items and taxation for the 2023 financial year to be in the range of $510 million to $560 million. This compares with the prior guidance range of $450 million to $530 million.

Ongoing fuel price volatility, global recessionary risks and inflationary pressures across the entire supply chain remain high and have the potential to impact the final result for the 2023 financial year.

Ends.

[Balance]

https://www.nzx.com/announcements/410480

Air New Zealand previously provided full year earnings guidance to the market at its 2023 interim results announced on 23 February 2023. Since this time, the airline has continued to experience strong levels of demand on both the domestic and international networks. US dollar jet fuel prices have also declined below those assumed in the earnings guidance provided in February 2023, although the New Zealand dollar has also weakened over this time, reducing the impact of these declines.

The improvements in revenue and jet fuel price are expected to be partially offset by softer cargo revenues due to increased competitive capacity, particularly in Asia, impacting yields and load factors.

The airline’s network capacity expectations for the second half of the financial year remain largely unchanged from the February guidance, with approximately 95 percent of domestic and 80 percent of international pre-Covid capacity levels across the network.

On the basis of the updates above, and assuming an average jet fuel price for the remainder of the 2023 financial year of US$95 per barrel, the airline now expects earnings before other significant items and taxation for the 2023 financial year to be in the range of $510 million to $560 million. This compares with the prior guidance range of $450 million to $530 million.

Ongoing fuel price volatility, global recessionary risks and inflationary pressures across the entire supply chain remain high and have the potential to impact the final result for the 2023 financial year.

Ends.

Against a current market cap of $2.6 billion, the mid point forecast of $535m NPBT (will be no tax for a few years given the losses sustained in the last 3 years of the pandemic) puts the stock on a PER of 4.85X or 6.75X after notional tax of 28%.

Looks cheap.

[Poet]

Against a current market cap of $2.6 billion, the mid point forecast of $535m NPBT (will be no tax for a few years given the losses sustained in the last 3 years of the pandemic) puts the stock on a PER of 4.85X or 6.75X after notional tax of 28%.

Looks cheap.

It does look cheap, but remember that they are still working through a huge pile of what they laughingly refer to as 'credits'

When they cancelled flights due to Covid, they held on to as much of customers' cash as they could which means that post pandemic they were able to boost the cost of fares significantly due to their customers being captive (due to not being able to spend the credits elsewhere)

A lot of resentment out there in customer-land so watch out for a backlash once credits are used up, both in loss of customer loyalty and in loss of pricing power

The credits are obviously not cash so watch cashflow as well.

Wealth effect of housing market no longer present - splurging on travel maybe a little less the next few years

RB engineered recession on the way.

Overall, I'd say be cautious

[Balance]

It does look cheap, but remember that they are still working through a huge pile of what they laughingly refer to as 'credits'

When they cancelled flights due to Covid, they held on to as much of customers' cash as they could which means that post pandemic they were able to boost the cost of fares significantly due to their customers being captive (due to not being able to spend the credits elsewhere)

A lot of resentment out there in customer-land so watch out for a backlash once credits are used up, both in loss of customer loyalty and in loss of pricing power

The credits are obviously not cash so watch cashflow as well.

Wealth effect of housing market no longer present - splurging on travel maybe a little less the next few years

RB engineered recession on the way.

Overall, I'd say be cautious

All good points and why Air NZ is trading on such cheap multiples.

[Rawz]

Against a current market cap of $2.6 billion, the mid point forecast of $535m NPBT (will be no tax for a few years given the losses sustained in the last 3 years of the pandemic) puts the stock on a PER of 4.85X or 6.75X after notional tax of 28%.

Looks cheap.

It does look cheap, but remember that they are still working through a huge pile of what they laughingly refer to as 'credits'

When they cancelled flights due to Covid, they held on to as much of customers' cash as they could which means that post pandemic they were able to boost the cost of fares significantly due to their customers being captive (due to not being able to spend the credits elsewhere)

A lot of resentment out there in customer-land so watch out for a backlash once credits are used up, both in loss of customer loyalty and in loss of pricing power

The credits are obviously not cash so watch cashflow as well.

Wealth effect of housing market no longer present - splurging on travel maybe a little less the next few years

RB engineered recession on the way.

Overall, I'd say be cautious

All good points and why Air NZ is trading on such cheap multiples.

agree agree agree

[silverblizzard888]

Well not to bad buying a stock thats already pricing the key risk factors, more upside if things don't end up as doom and gloom.

[Ltw]

How far away do you smart people think we are away from a Dividend?
Late this year? sometime next?

[Sideshow Bob]

How far away do you smart people think we are away from a Dividend?
Late this year? sometime next?

Wouldn't expect this year. They still have $1.74 billion of interest-bearing liabilities.

I would say their major shareholder will want some of their money back they lent them through Covid.....I think they need it back.

However they might throw shareholders a bone......$0.01 divvy costs them $33.6m.

[kiora]

Flying soon?
"During the presentation, CATL said its working with partners on the development of electric passenger aircraft practicing aviation-level standards and testing in accordance with aviation-grade safety and quality requirements"
https://thedriven.io/2023/04/21/worl...ttery-density/