AIR - Air NZ.

[Balance]

Interesting. I'm pretty sure the current price difference between them is very close to an all time record high, just over $1.20 (plus exchange rate as well, obviously).
Their relative EPS performance this first half will be most interesting, (Fy 2015 QAN 25cps AIR 29 cps).

Watch for QAN results today, Roger. Market is not only expecting a spectacular result but also, special dividends and/or capital returns.

Bearing in mind that QAN has not paid a dividend since 2010 while AIR has paid dividends every year, market is not expecting anything special in capital initiatives from AIR so let's see if AIR springs a surprise.

[Beagle]

Yes I wouldn't entirely rule out some form of capital initiative for AIR on Thursday as they're in a far better position in terms of gearing than QAN but I think its far more likely at year end. Tony Carter told me after the annual meeting they'd copped a bit of criticism for not announcing a special dividend in FY15. Interestingly SP price to book value according to 4 traders for Qan 2.12, AIR 1.36. Forecast PE 6.72 QAN, 5.54 AIR.
Qan growing RPK's at just under 5%., AIR at 16% YTD, (from latest available YTD operating stat's of each airline)

3 more ~ $150m Dreamliners due CY16 for 9 by year end and once they're here we enter a period of more modest capex, (some of this has already been paid with deposits on new aircraft on order at a very high $520m as at 30 June 2015). Conclusion, I think AIR are in very robust shape for high dividends and / or some form of capital initiative this year, (special divvy / share buy-back).

P.S. You could say we're well positioned

[Balance]

Great result from Qantas just announced - better than market expectations.

Share buyback of $500m announced to commence from March 2016. No outlook given dynamics and volatile nature of industry.

Here's to AIR showing QAN how it is done comes 25th Feb.

[Beagle]

QAN result out and its right at the top of guidance provided on 15 December. A Stunner. Underlying profit $921m,, last year$367m up 251% (previous guidance provided 15/12/15 $875-925m). EPS 31.9 cps. $500m on market buy back.
Will analyse further shortly. I like the idea of the on market buy back...you guys at AIR reading this ?

[sharp]

http://www.asx.com.au/asxpdf/2016022...vzz45j5xg7.pdf

Qantas - underlying profit AU$921M

Best performance in 95 year history

Buy-back AU$500M

Just saying.

[Beagle]

Interesting that they're expecting ~9% increase in competitor capacity in 2H v tourism growth currently running at 8.2%. They're growing group capacity at ~5% so are expecting to lose market share to Chinese airlines who are growing capacity to Australia by a whopping 50%
Total seat capacity growth in CY16 in N.Z. is expected at 11.9% on Tourism growth of 10% so those forward competition metrics are not materially dissimilar.

31.9 cents EPS is a highly credible and satisfactory effort for the half year, (25 cps for the full Fy2015). AIR will need to be on top of its game to match that.

[Balance]

Interesting that they're expecting ~9% increase in competitor capacity in 2H v tourism growth currently running at 8.2%. They're growing group capacity at ~5% so are expecting to lose market share to Chinese airlines who are growing capacity to Australia by a whopping 50%
Total seat capacity growth in CY16 in N.Z. is expected at 11.9% on Tourism growth of 10% so those forward competition metrics are not materially dissimilar.

31.9 cents EPS is a highly credible and satisfactory effort for the half year, (25 cps for the full Fy2015). AIR will need to be on top of its game to match that.

Fuel savings came through strongly for Qantas.

Situation with Air NZ is a longer hedging strategy vs Qantas? So benefit could kick in next financial year?

[Beagle]

From what I can see Balance QAN have been hedging out further than AIR and are using options more than the collars AIR have been using. Another factor around the fuel savings for QAN is their slightly older and less efficient fleet. AIR have not done especially well with their fuel price hedging in recent times but seem fairly well positioned as at their latest disclosure.
The old 747's QAN are still using are thirsty beasts so you're going to save more when fuel is cheap with older technology than newer. AIR will do well too and own ~80% of their fleet so lower impact of operating leases being paid in $U.S.

QAN SP reaction unsurprisingly is positive with early action seeing it up ~ 13 cents to $4.12.

Really AIR have been issuing a lot of shares to executives over the years with ~ 45m outstanding to be exercised as at 30 June 2015 IIRC so they need to mop up the excess supply of shares in the market if they are serious about looking after investor interests. An on market buy-back of circa $300m is well and truly within AIR's financial capabilities and is something I am sure many shareholders would warmly welcome. Their previous buy-back regime that was seldom activated was for up to $60m per annum or 30 million shares whichever was the greater. Not really all that serious for a company with over 1.1 billion shares on issue and cash flow from operations of just on $1.1b last year is it !

[Balance]

Share buyback and special dividends - comes down to government being the majority shareholder, Roger.

A higher sp does not really do anything anymore for NZ government as it is unlikely to sell down any more shares but a higher dividend would. So watch out for that.

[sb9]

QAN SP reaction unsurprisingly is positive with early action seeing it up ~ 13 cents to $4.12.

May have spoken bit too soon there Roger, its drifting back now down 13c as I type.