AIR - Air NZ.

[emveha]

Is it good news that others are down more than AIR or bad news that the airline industry is not doing well atm?

All is not gloomy in the airline industry. Orders at Farnborough this year totalled $120bn (down from $168bn two years ago but still above expectations). Boeing's market outlook for the next 20 years anticipates demand for 39620 new airplanes valued at $5.9tn. No new order from AIR but we know that they have renewed their fleet already. Even with concurrence knocking at the door, I am confident in the future of AIR in the long term.

[Beagle]

Is it good news that others are down more than AIR or bad news that the airline industry is not doing well atm?

What Im seeing is a major fall for AIR(yes,I got caught as well) and no bounce.--and not much room for markets to appreciate?

Customers have to some extent got over the novelty of cheaper fares so in effect the fuel price advantage no longer exists. World-wide demand for air travel according to IATA is still growing at 5% per annum and its anticipated that'll continue over the long term. Its all already factored into the record low PE in my opinion. Earnings could halve in FY17, (I'm not suggesting they will) and AIR would still be trading on a PE that's well below its ten year average of about 11. Some stocks trading on super high PE's have perfection already built into the price, AIR obviously isn't one of them.

Best to compare its forward PE of 4.6 with other industry players. QAN the best comparison. AIR will still be flying in another 76 years time.

[Snow Leopard]

Ramping:

You might like to consider the monthly cost of jet fuel consumed as it came down and AIR's previous expensive fuel hedges came off, their average cost in the first half was circa $U.S.60 barrel. If such information were available you'd probably find their net profit from operations remained broadly consistent....probably why despite these yield reductions they've retained their profit forecast before unusual items of $800m before tax. Fuel is roughly 20% of their operating cost so if the cost has halved from the previous year, (they locked in maximum allowable hedging at very close to the bottom of the oil cycle in January around U.S$30 barrel) surely its not all that difficult to understand they're making excellent money notwithstanding the yield decline. At the risk of being Dogmatic people might like to consider if a super low forward PE of only 4.6 covers an absolute multitude of potential competition evil's !

BB you should stop passing off your time expired uneaten jellymeat to other cats, its no good for them.

Research:

Fuel Hedging Announcements provide great insights for those of you who think that spreadsheets can be fun, and here are a couple of highlights for you:

FY17 Estimated Fuel Consumption is about 6.6% greater than FY16 (c.f. FY16 to FY15 was about 7.6% greater).

Whereas this time last year (Final Quarter of FY15), AIR had only hedged about 23% (1H 44% / 2H 2%) of their fuel estimates for the FY16 year,
Now, as we approach the end of FY16, they have already hedged 50% (1H 83% / 2H 22%) of FY17's estimated fuel.

I wonder how their currency hedging is going?

Best Wishes
Paper Tiger

PS The hedge Brent but burn Jet Fuel

The average cost of a barrel in the first half year was approximately US$51.
The average cost of a barrel in the second half year was approximately US$42.

But you do not just buy a barrel of crude and pour into the engine, there are many more fuel related expenses, hedging costs, storage and handling costs etc.

The half year itemizes Fuel as $484M (or 25.6%) of the $1,887M operating expenses.

Best Wishes
Paper Tiger

[brend]

All is not gloomy in the airline industry. Orders at Farnborough this year totalled $120bn (down from $168bn two years ago but still above expectations). Boeing's market outlook for the next 20 years anticipates demand for 39620 new airplanes valued at $5.9tn. No new order from AIR but we know that they have renewed their fleet already. Even with concurrence knocking at the door, I am confident in the future of AIR in the long term.

The 777 fleet will need be replaced in the next decade or so.

I remember this article a few years ago.

http://www.ausbt.com.au/air-new-zeal...vs-airbus-a350

[Tony Two Gloves]

Share price doing nicely today, the word is finally out about the massive divvy's....... (ramp, ramp, ramp)

[skid]

I was wondering if cathey Pacifics massive loss would rub off on other airlines,but looks like the divey has won out for AIR.

Customers NEVER get over cheap fares IMO---It will always be a big factor,so the question is ''what does AIR do to earn the expensive fares?"

[Beagle]

Ramping:



Research:


The average cost of a barrel in the first half year was approximately US$51.
The average cost of a barrel in the second half year was approximately US$42.

But you do not just buy a barrel of crude and pour into the engine, there are many more fuel related expenses, hedging costs, storage and handling costs etc.

The half year itemizes Fuel as $484M (or 25.6%) of the $1,887M operating expenses.

Best Wishes
Paper Tiger

I know what I'd like to do with a barrel of oil sometimes...but thank you for these wonderful insights I never would have gained from over 20 years of acting for private operators in the aviation industry, (you forgot one of the biggest costs (refining costs). Meant to say fuel is roughly 20% of revenue. Great day when the pussy cat gets to correct the dog isn't it.

Anyway yes back to AIR...I think some investors are positioning themselves for the forthcoming dividend feed, those already in are "well positioned"

Speaking of being well positioned, real tigers seem to have the answer on a hot day http://www.msn.com/en-nz/news/photos...cid=spartandhp..maybe there's a message in that for you ?

[Tony Two Gloves]

Hmmm just pondering potential tax implications........

If I sell my AIR and make $15K all good I will be taxed on the gain. If I hold get a nice fully imputed divvy and the SP drops back to break even and I sell I will not be taxed? Is this correct

Thoughts?

[Beagle]

Hmmm just pondering potential tax implications........

If I sell my AIR and make $15K all good I will be taxed on the gain. If I hold get a nice fully imputed divvy and the SP drops back to break even and I sell I will not be taxed? Is this correct

Thoughts?

If you've already declared yourself as a trader to the IRD or bought with the specific intention of selling and want to declare the trade then I agree with you.

[Tony Two Gloves]

If you've already declared yourself as a trader to the IRD or bought with the specific intention of selling and want to declare the trade then I agree with you.

Thanks Roger, thought that would be the case. Am committed to hang in for the divvy and see how the land lies in the aftermath of this, hoping that it will recover to pre divvy price in 3 - 4 weeks. Still think it should be $2.40 - $2.50, but I also thought Mortgage rates would never be under 4%!