AIR - Air NZ.

[Zaphod]

I would have thought VAH would have been strong enough and have enough momentum to fly under its own power by this stage ? Ansett Mk2 anyone ?

Tongue in cheek, I know..... Ansett showed far less long-term viability than VAH did at this point in its lifecycle.

Given the fundamentals of AIR hasn't changed, I'm not sell any my holding based on this. Would pay to keep a keen eye on the VAH financials though.

[winner69]

Virgin - Another few hundred million of debt on top of the $3.1 billion they already have isn't a big thing

[Raz]

Virgin - Another few hundred million of debt on top of the $3.1 billion they already have isn't a big thing

Well it is if the brand is not perceived well in its market place and it still struggling with this economic tail wind...now I'm wondering....

AIR share price has not performed well in the past twelve with its best results to date..take away the dividend premium potential and it become a trade share for me...simple.

[couta1]

Well it is if the brand is not perceived well in its market place and it still struggling with this economic tail wind...now I'm wondering....

AIR share price has not performed well in the past twelve with its best results to date..take away the dividend premium potential and it become a trade share for me...simple.

Yes I have come to the same conclusion. Winner the market is rampant with greed currently, a few selling out of Air is neither here nor there, perhaps it's time to sell down in general and wait for the fear to return which it will as sure as winter is coming. PS-I love winter and all its trimmings

[Ggcc]

Nice to see you back couta. I can say I miss your posts

[winner69]

Had a quick look at Virgin financials.

Last 1/2 year was pretty abysmal seeing airlines are meant to be creaming it. Operating cash flow was only $10m and after capex etc negative free cash flow of $250m odd.

Debt over $3.1 billion with equity less than $1 billion - highly leveraged. See why they need a few hundred million extra cash in light of current cash burn.

AIR will never see the amount lentagain. I suspect that it will end up as equity along with a another decent injection of capital before years end.

This 'connection' with Virgin must be vitally important to AIR - yes?

[Beagle]

Had a quick look at Virgin financials.

Last 1/2 year was pretty abysmal seeing airlines are meant to be creaming it. Operating cash flow was only $10m and after capex etc negative free cash flow of $250m odd.

Debt over $3.1 billion with equity less than $1 billion - highly leveraged. See why they need a few hundred million extra cash in light of current cash burn.

AIR will never see the amount lentagain. I suspect that it will end up as equity along with a another decent injection of capital before years end.

This 'connection' with Virgin must be vitally important to AIR - yes?

Thanks for looking at VAH's balance sheet, saved me a little job this morning and more than happy to rely on your figures. I suspect the amount lent will get converted to equity towards the end of the review. I think this extra equity is enough to put VAH on a reasonable footing. If VAH with further profit this half can get to a debt : equity ratio of 2:1 that's not too bad a not far off QAN's level of capitalisation either.

I need to apologise to you good folks for a mistake I made yesterday, (realising that the odd person on here relies on me to crunch the numbers properly). Yes the current level of gearing was about 53.5% as at 31 December 2015 and this is fairly low by international standards for this capital intensive business which is why AIR is one of the few airlines in the world to have an investment grade credit rating.

Yes they have a self imposed ceiling of 55% but I think this is a glass ceiling and is moveable to some extent.

Yesterday I made the mistake that this short term loan to VAH would change the gearing ratio and in the cold light of a new day I realise this is a mistake and it won't. It will simply change one asset class, cash for another, short term advance to VAH so the gearing ratio won't change. Apologies to those that relied on my statement on gearing yesterday and I hope this wasn't a major factor in your decision to sell.

This is speculative on my part but I think its likely that this short term loan to VAH will get converted to an equity investment due course, hopefully after a very thorough review of VAH's operation but again this will not change AIR's gearing as again this simply transfers the money into another asset class, investment in associate company as opposed to loan to associate company.

Perhaps I should unpack the whole finance lease and operating leases issue for those that don't know and how that's translated into the balance sheet footings so that people can be more informed on how this works. All future lease liabilities both operating and finance leases, primarily in overseas currency, are converted into debt as at the exchange rate prevailing as at balance date. What this means is that if our currency is lower like it was as at 31 December 2015, approx. 65 cents U.S. the $N.Z amount of those liabilities is higher and thus their gearing at balance date reflects that. That's to the best of my knowledge how I understand it anyway but please DYOR.

If we see the $Kiwi head up toward 70 cents U.S. as we head towards 30 June 2016 and taking into account profit for the current half we could see gearing under 50% and room for a modest special dividend.
Its too early to say. Gordon Gekko in Wall Street famously said, "Don't get emotional about stocks" (I must keep that in mind).

Overall I have a neutral view on AIR at this stage. There are strong headwinds coming in the form of significant extra competition and the pricing of some of the discount carriers such as AIR Asia X is fairly disruptive but AIR has a good brand and a good business model so should do well over the long haul and is enjoying strong tailwinds from robust tourism growth.

Those selling yesterday at $2.88 ex divvy got close to effectively $3 on a cum divvy basis given they just got that 10 cent dividend so not too bad a result and given all the circumstances including the VAH matter i'm not displeased I regularised the size of my investment in AIR from a heavily overweight position.

I might look to add a bit more freight if there's another correction down towards $2.75 at some stage, depending how their monthly operating stat's pan out over the next few months.

[winner69]

There was a Dreamliner parked up at Wellington the other night

It had United Arab Emirates written down the side but wasn't in the normal Emirates Airlines livery

Another airline thinking of coming to NZ? Or just some government delegation from UAE.

[Raz]

There was a Dreamliner parked up at Wellington the other night

It had United Arab Emirates written down the side but wasn't in the normal Emirates Airlines livery

Another airline thinking of coming to NZ? Or just some government delegation from UAE.

Actually it was both.

[Nasi Goreng]

I look at it in a rather simplistic way, if Air NZ was to pay a special divi of $150M, then this would ex divi have a $0.135 impact on share price.

The fact is, that this $150M has not gone up in smoke, it is an investment and I trust that the management team at Air NZ have thought it through. So the impact on share price right now should be nil unless some punters were holding out for a super dividend later in the year.

I'm not sure how long I will hold this for but yesterday's announcement is not really sending any alarm bells.