AIR - Air NZ.

[macduffy]

One thing holding the sp back has been the lack of liquidity - it will be good to have a larger float.

The main reason for the lack of liquidity is of course the fact that the last Labour govt had to bail out the airline a few years ago, of necessity watering down the interests of then shareholders.

Not disputing that it runs a good operation - I travel on it by choice - but that doesn't make it a good investment, IMO.

[shasta]

The main reason for the lack of liquidity is of course the fact that the last Labour govt had to bail out the airline a few years ago, of necessity watering down the interests of then shareholders.

Not disputing that it runs a good operation - I travel on it by choice - but that doesn't make it a good investment, IMO.

Airlines are notorious for losing money, & the Govt selling down from 78% to 51% isnt good enough in my mind, it should do an institutional book build & sell it all

It is NOT a strategic asset, & Govt ownership has hindered investment in the sector to provide real competition.

The moth balling of Whenuapai when Waitakere City Council & Infratil wanted to spend $50m shows that the Govt wasnt acting in the best interests of NZ travellers

[modandm]

Airlines are notorious for losing money, & the Govt selling down from 78% to 51% isnt good enough in my mind, it should do an institutional book build & sell it all

It is NOT a strategic asset, & Govt ownership has hindered investment in the sector to provide real competition.

The moth balling of Whenuapai when Waitakere City Council & Infratil wanted to spend $50m shows that the Govt wasnt acting in the best interests of NZ travellers

I respectfully disagree strongly with you shasta.

1. Airlines are a vital infrastructure and even if they all 'lost money' (FYI Air NZ has actually made a great return for the govt since bail-out) they should still be supported as they are by governments all over the world. Why? The positive externalities from air travel on trade and tourism are great. Even if the govt loses money on the airline - it make it back tourists spending boosting gdp and tax take. Especially in a county like NZ where tourism is a key part of the economy.

And if you think other airlines would serve NZ the same way NZ does your kidding yourself. They would be far more agressively profit maximising and route structures and frequency would be limited.

Govt has not hindered the sector - it has invested in it - Air NZ can and does compete with overseas mega airlines who often receive govt support greater than Air NZ does. There is no place for small airlines in the business - natural monopolies and requirement for scale dictate this in the same way as the power generation sector.

In summary - it is a strategic asset - the government is right to own 51% and bail it out if necessary. The airline has been given a strong mandate to grow tourism and trade with key partners in india/china/us, as well as maintaining links between regional NZ to support NZ business. The bail-out was given with the mandate that Air NZ should maintain a large cash position and operate defensively as it does to prevent any need for a future bail out.

At this stage I would say it is doing this very well.

Regarding the airport thing...
I agree AIAL is a monopoly - and should be regulated more closely.
However if you look at Sydney with one airport - there is no capacity need for another at whenuapai. Duplication of assets is not economically efficient - and splitting traffic would mean the benefits of a hub at AKL for international/domestic and premium lounges etc would have been lost.

The demand was not there from airlines to fly to whenuapai. Case closed.

[Jaa]

Jaa- whats your take on the shareprice? are you buying?

No I have not been buying, I think the share price might go sideways for a while yet as all the growth drivers I was seeing have been pushed out or disappeared. The shares are good value but when it comes to airlines I require a bigger margin of safety.

Am getting tempted to pick up some VBA at 29c though, I like the new brand and they have approval for all the new alliances. Qantas also continues to go downhill in my opinion which can only be good for VBA & AIR.

[modandm]

interesting you say that jaa.

I would own AIR over VBA any day - and do.

Where NZ operates with a relative monopoly domestically and is in a strong position internationally, VBA operates in a competitive domestic and international market.

If you look that the latest operating stats for both - as im sure you do - air nz's load factors and likely profits look much better. This said if VBA can improve yields as it aims to - it could be quite successful. I just don't think it will be as successful as AIR.

I agree the NZ is yet to fully recover from the japan and chch quakes but looking at the stats - there was a recovery in april from march.

A key one is the Asia/Japan/UK demand. In march it was 15% lower than last year - due to the quakes, in april it was 11% lower. I will be keeping a close eye on stats going forward and will post updates when they come out - usually around 22nd of month.

[Jaa]

interesting you say that jaa.

I would own AIR over VBA any day - and do.

Where NZ operates with a relative monopoly domestically and is in a strong position internationally, VBA operates in a competitive domestic and international market.

If you look that the latest operating stats for both - as im sure you do - air nz's load factors and likely profits look much better. This said if VBA can improve yields as it aims to - it could be quite successful. I just don't think it will be as successful as AIR.

I agree the NZ is yet to fully recover from the japan and chch quakes but looking at the stats - there was a recovery in april from march.

A key one is the Asia/Japan/UK demand. In march it was 15% lower than last year - due to the quakes, in april it was 11% lower. I will be keeping a close eye on stats going forward and will post updates when they come out - usually around 22nd of month.

I agree AIR is the better company. I just think VBA has more growth potential over the next 2 years than AIR as all their current initiatives come on stream, I believe AIR were thinking along the same lines when they bought their stake in VBA, It was this purchase that got me thinking about VBA and since then the price is down over 10cents,

Your comments about each airline`s competitive environment probably explain why VBA has bigger share price swings than AIR, Which again means there should be a bigger risk/reward payoff,

As for AIR I agree they will recover but it will be slower than before the earthquakes, They will also not get such a good boost from the Rugby World Cup, The Governments impending sale is also hanging over the share price, Thus AIR could take a while to get to get back to where it was in January

[Jaa]

News in the last few days that both Tiger and Qantas are cutting capacity in Australia and Aus/NZ respectively can only be good for Air NZ & VBA. Shows how tough things are out there though.

Tiger Cuts
http://blogs.crikey.com.au/planetalk...ane+Talking%29

Qantas Cuts
http://www.nzherald.co.nz/business/n...ectid=10729870

[BIRMANBOY]

Agree with you there Jaa...as they say.."Fish got to swim, birds got to fly" (and Kiwis got to travel). Whats nor to like, it pays a decent dividend, is in a bit of a trough and has a history of ups and downs...time to buy!
(Disc. just added to my port.)

News in the last few days that both Tiger and Qantas are cutting capacity in Australia and Aus/NZ respectively can only be good for Air NZ & VBA. Shows how tough things are out there though.

Tiger Cuts
http://blogs.crikey.com.au/planetalk...ane+Talking%29

Qantas Cuts
http://www.nzherald.co.nz/business/n...ectid=10729870

[modandm]

guys i would like to touch on a few points relevant to VBA/NZ following SQ - VBA tie up

This is excellent news for VBA and is the best possible outcome for their expansion into asia. One stopping to everywhere in asia and india is a great selling point for VBA. Note that Singapore is the largest destination in asia from australia, followed by HKG, KUL, NRT (tokyo) then BKK/PVG.

VBA's asian expansion plans now center on deploying a few a330's to primary non-SIN asian destinations (1st priority HKG) from Melbourne and Brisbane. Combined with a codeshare on Virgin Atlantic to HKG from SYD VBA will have the 2 primary asian business destinations non-stop sewn up, with all destinations as a one stop in singapore.

Depending on NZ's negotiation skills I would like to see VBA flights to HKG link to NZ's HKG-LHR flight (which is sort of struggling) giving Australians another option on the kangaroo route. Obviously this wouldn't go down to well with ETIHAD - hence NZ buying the stake (they get a louder voice). We should note that VS's SYD-HKG (day flight) does codeshare with NZ but it doesn't connect to NZ's flight well at all. Such is this VBA could consider opening a SYD-HKG (overnight) service also. This would mean SYD-BRI-MEL all feeding NZ at HKG for the on flight to London. This supporting a daily 777-300 in place of a 777-200 5xweek on the route which would be much better use of the LHR slots.

Obviously this is somewhat pie in the sky- but plenty are predicting VBA provide a direct HKG service with their new a330s since MEL and SYD business travelers who might accept a SIN stopover to PEK/PVG etc a vs direct on a Chinese carrier (poor reputation) will not accept a stopover on the way to Hong Kong.
In addition due to the shortish flight time 1 a330 could do each destination comfortably daily. With 2 doing perth and 2 more on order - one more could do perth (SYD/MEL/BRIS - PERTH daily) and 1 could do HKG-MEL/SYD maybe 3x to mel 4x to syd weekly.

Be great to hear your thoughts

Edit: Just had a look at the VBA timetable - at present 2 a330's being fully utilized on SYD-PER. This being the case it looks unlikely that VBA will deploy either of the 2 a330's on order on international routes. Stay tuned for a further order from VBA for a330's. IMHO another 1 or 2 is needed so Melbourne and Brisbane have enough links to Perth, so an order for 4 or more would suggest international ambitions.

[BIRMANBOY]

Looks like it might be on the way up ..SP at 1.11, 1.12 and 1.13. Yee ha.