AIR - Air NZ.

[Beagle]

Agree with you there Roger, don't think the latest announcement has 20-30c impact on sp, its all bit overreaction in my opinion. In times of panic people tend to loose focus on other things like the new routes to be announced soon, new services to begin next month and purchase more flights for domestic routes. All this only further reiterates what they said at ASM just a little while ago. Just a shame that people of short term memories. By all means, competition is good but AIR has plans in place to combat that loss with other plans as mentioned.

Skid / Sb9 you make good points. As mentioned previously I get a little frustrated with broker forecast models. Qantas are subject to very similar fundamental value drivers as AIR and I think its a better researched stock that AIR with higher quality analysis, (about 14 brokers in Australia analysing this stock IIRC) They're subject to extra competition from a range of carriers, the same fuel dynamics, similar young fleet and are a commodity based economy just like we are and are flying in a not dissimilar airspace. They have unions and older fashioned labour practices e.t.c. Broker consensus is $4.46 IIRC based on discounted cash flow models which appear to involve quite different sets of assumptions about the airline going forward. (brief re-cap, their EPS was 25 cps last year, AIR's was 29.1 cps - outlook guidance at their ASM wasn't as strong as AIR's) This to me suggests that based on best known current financial information to each airline AIR is likely to also beat QAN's eps in FY16. Further, AIR are on record as being very optimistic about their long term outlook. AIR are building economies of scale into their operation which means more of their growth will translate into bottom line profits. The wide spread in consensus valuation of AIR $3.03 and QAN $4.46 when AIR have beaten and look likely to continue to beat QAN's eps doesn't make a lot of sense to me.

Its all very well for people to get concerned about the entry of AA into the LA - AKL route but are people forgetting that AIR started their Singapore service about 11 months ago and are shortly starting two new routes with a further two pending sometime in the next 12 months ? A lot of the current SP action is sentiment driven in my opinion.

Just by way of a completely random sample to back up what you and I have suggested sb9 about growing demand for domestic services, yesterday I was very fortunate to catch my flight to Napier...I got the very last park at the regular Auckland public carpark after spending 20 minutes circling the entire place looking for one. Fortunately experience has always taught me to allow a spare 15 minutes over and above my estimated time to get to the airport to cover contingencies and I had already checked in for this flight online..even so we only just managed to board the aircraft before they closed the flight. Middle of the week, middle of the day a random ATR flight and it was absolutely full not a single spare seat. Why are so many people travelling these days ?...could it be because its so cheap they think nothing of flicking around the country for a good day / weekend or whatever away ?

People seem to be forgetting that American Airlines will grow the size of the market overall, not steal all its pax off AIR and they also forget that AIR have cunning ways of using golden handcuffs to keep customers loyal, Airpoints being one, electronic advice of sales another, grabaseat another, and wait there's more, lots of people like to try and build their status points too and enjoy the Koru lounge.
But wait there's even more...lot's of Kiwi's are quite simply parochial when choosing which airline to fly and are by default more happy than not to pick their own national airline whether they're a shareholder or not.

Of the circa 300m American's maybe only 10% ? of them have even heard of N.Z. and far fewer have heard of AIr N.Z. but little ol N.Z. will get plenty of tourism exposure from this major airline and growth running at over 10% from that country at present, will undoubtably increase further IMO. I don't see any reason to panic or lose sleep.

I think the odds of another dip to $2.40 are slim but I have my chequebook open if it does

[Hoop]

How BIG will the bounce be I wonder

Not bouncing is it?

Ominous

Well, that trade done with. Let the first breach of the stop loss go and (fortunately) it recovered but a 2nd breach can't be ignored so out they went with a 10% plus profit in a few weeks.

$2.70 up 5c this morning..there's your bounce Winner

[skid]

First of all-congrates on the rise in SP and I am by no means discounting all the valuable info(esp Roger) but to discount the odds to slim of another fall to 2.40 we really need to know why it happened twice since June-then we can accept the odds as slim--just sayin

all the airlines involved have reported record profits(Id be surprised if AA and Quantas didnt have ''sweetners''as well---Having said all that -I hate airlines from the States and hate LAX(not that that is particularly important)

Basically this is just the final step in healthy competition from Quantas(they now have AA (worlds largest )for long haul and Jetstar for domestic----(whats funny is THL only went up 1c yesterday) But 2c today so far--maybe thats what we should be watching!

[Beagle]

Skid - AIR has updated the market that they expect profit to double this half since the last time they touched down to $2.40. In my view this advice was well ahead of the market consensus view and I think the fact that the SP went up strongly after that announcement at the annual meeting is supportive of my view.

I'm not saying it can't / won't go down to $2.40 again, but I am saying I think this is unlikely on the balance of probabilities based on current guidance, new routes and all the other things I've mentioned.

I have a lot of confidence in the management and directors and believe this is a very high calibre company...maybe that's why I don't get too concerned with short term price variations and am happy to be on board for the long haul.

[Hoop]

One competitive strategy for national airlines to protect their market share from large outside intruders is to create a low cost airline company..usually a loss making subsidiary to run head to head at the competition

Last time competition ate away at AIRs high margins they created Freedom Air..Will we see this Phoenix arise from the ashes again

[Teeps]

And here is Air New Zealand's response to yesterday's AKL-LAX news - new long haul route to be announced..

http://www.stuff.co.nz/travel/news/7...unce-new-route

Chicago anyone? Place your bets....
Be interesting to see what the SP does in the next 48 hours...

[sb9]

Thanks Teeps, there we've it, GAME ON!!!

[Beagle]

One competitive strategy for national airlines to protect their market share from large outside intruders is to create a low cost airline company..usually a loss making subsidiary to run head to head at the competition

Last time competition ate away at AIRs high margins they created Freedom Air..Will we see this Phoenix arise from the ashes again

Singapore Airlines has Scoot, Qantas has Jetstar so I wouldn't rule it out as a possibility. Maybe they could keep some of the old 767-300's they're retiring next year, (which would have basically been depreciated down to almost nothing in their books), and use them. Saw a couple of them land at the airport the other day. Amazing what a lick of new paint does to an old plane.

So a major announcement of a new route tomorrow morning and at least one more in 2016...sounds good to me

[Teeps]

I've taken the opportunity to increase my holding in AIR with the weakness in price over recent days. To me, this stock has significant movements based on a couple of competitive announcements. Again, turbulence is part an parcel of the aviation game and thus we see a bit of a bumpy ride in the SP. I still have absolute faith in the fundamentals of this business given the investment in fleet, its people and innovation w.r.t new revenue channels. Given the information publicised at the recent AGM, AIR is in a very good position domestically and internationally which to me will translate into a record FY16 year. My pick is for the price to breach the $3 barrier at or around the half year results announcement, with a significnat uplift from FY15 expected and a likely special dividend due.

AIR has a smart strategy of not relying on any monopolistic route position in the modern world and thus I believe the drop in SP is completely overcooked. I don't think we will go as low as $2.40 any time soon - I personally agree with Roger that fair value is circa $3.50-3.75 for a top quality organisation with excellent leadership and a stellar recent track record.

I'm in this for the long haul, so to speak.

[Beagle]

I've taken the opportunity to increase my holding in AIR with the weakness in price over recent days. To me, this stock has significant movements based on a couple of competitive announcements. Again, turbulence is part an parcel of the aviation game and thus we see a bit of a bumpy ride in the SP. I still have absolute faith in the fundamentals of this business given the investment in fleet, its people and innovation w.r.t new revenue channels. Given the information publicised at the recent AGM, AIR is in a very good position domestically and internationally which to me will translate into a record FY16 year. My pick is for the price to breach the $3 barrier at or around the half year results announcement, with a significnat uplift from FY15 expected and a likely special dividend due.

AIR has a smart strategy of not relying on any monopolistic route position in the modern world and thus I believe the drop in SP is completely overcooked. I don't think we will go as low as $2.40 any time soon - I personally agree with Roger that fair value is circa $3.50-3.75 for a top quality organisation with excellent leadership and a stellar recent track record.

I'm in this for the long haul, so to speak.

Exactly...Good post mate and welcome to the forum.