AIR - Air NZ.

[dingoNZ]

Their market cap has been a lot bigger than AIR for some time, I suspect the overnight crude decline will be positive for AIR in tomorrows trading session when institutional buyers come back

[Beagle]

Meanwhile the Qantas SP continues to crank along already up around 8% this year and now with a higher SP than AIR.

Last time that happened and I commented on it, that situation didn't last. One of those SP's is wrong...in my view its AIR's which deserves to be heading north towards $3.00.

[KiwiGekko]

Last time that happened and I commented on it, that situation didn't last. One of those SP's is wrong...in my view its AIR's which deserves to be heading north towards $3.00.

Lets hope you're right mate. :-)

In other news Qantas rated as safest Airline for 2015, Air NZ made the top 10. Article is here: http://www.airlineratings.com/news/4...lines-for-2015

[modandm]

That's not quite how it works. Revenue will be allocated on several factors, the predominant of which is PAX count.

Source: worked on audits pertaining to airline alliances

I understand the yield each airline generates through its sales are one of the factors. The minutiae of the deal are not material but I agree it would be interesting.

In any case glad to see the route kicking off.

I have heard gossip that the 767's may stick around longer than expected. They were supposed to be retired one-for-one with arriving 787's this year. It will be interesting to hear about this at the half year results. No doubt the lower oil price makes them more attractive, and management more confident about increasing capacity. If this were to come to fruition it would mean higher revenue growth, and with that operating leverage and profits. Thinking about it another way, these aircraft should be able to generate $10-15m each in incremental profit I would guess (somewhat out of thin air), which on aircraft worth only $10m each is pretty good going.

[Beagle]

Oil price decline continues at pace. Almost beggars belief that its more than halved in the last six months. Who would have predicted that six months ago ? Strange that the VAH SP hasn't really caught any real updraft ? I would have thought they'd be major beneficiaries of this decline given their predominantly older and less efficient fleet. Buying opportunity ?

[brend]

Oil price decline continues at pace. Almost beggars belief that its more than halved in the last six months. Who would have predicted that six months ago ? Strange that the VAH SP hasn't really caught any real updraft ? I would have thought they'd be major beneficiaries of this decline given their predominantly older and less efficient fleet. Buying opportunity ?

SP for VAH looks linear over the last 2 years

[Beagle]

Last time that happened and I commented on it, that situation didn't last. One of those SP's is wrong...in my view its AIR's which deserves to be heading north towards $3.00.

Nice to see the natural order of who deserves to be top dog with the SP restored once again. We can't have a Kangaroo on top of a Kiwi, it just wouldn't look right

[modandm]

Oil price decline continues at pace. Almost beggars belief that its more than halved in the last six months. Who would have predicted that six months ago ? Strange that the VAH SP hasn't really caught any real updraft ? I would have thought they'd be major beneficiaries of this decline given their predominantly older and less efficient fleet. Buying opportunity ?

Probably rather play it through AIR. Firstly at 40c VAH has been expensive due to other airlines buying in and expectations of improvement, which have been slow arriving due to FX headwinds, overcapacity and weaker demand. They do have considerable financial leverage too, so this oil price fall is acting more as a saving grace for them. The upside to VAH earnings should start to come in 2016, provided the 2 players start to behave a bit more rationally.

Qantas upside has come in part from a low valuation, part from oil (and Qantas do burn alot of fuel on long-haul 747s), part from improving domestic, and part from achieving cost savings well. As I have said in the past you can't shrink an airline successfully for long, and QAN's prospects for sustainable profit on international routes still look poor.

Lastly the VAH fleet is good, probably as or more efficient than AIR's (only 3 dreamliners so far..) 737's are mostly leased and gone after 8 years, compared to NZ who will own domestic A320's for 15-20 years (most of useful life).

[Beagle]

I've given the VAH situation some thought and I'd rather play it through AIR too.

[Beagle]

http://www.reuters.com/finance/stock...?symbol=AIR.NZ

Average analyst forecast for 2015 year has risen from 22.63 cps 2 months ago to 27.1 cps now.
This implies a $54m consensus increase in net earnings after tax from the oil price decline or $75m before tax.
I think we'll see continued earnings upgrades from the analysts as oil stays low.
Consensus 2016 EPS has grown from 25.66 cps two months ago to 30.35 cps now.