AIR - Air NZ.

[oldtech]

2019 earnings before tax expected to be $340-$400 million, which is unchanged from the 2019 Interim Result announcement last month ago

[Beagle]

Good solid common sense review realigning the business to a lower growth environment. Capex deferral looks good to me and I note capex for FY20, FY21 and FY22 is smoothed out and at least $200m per annum less than annual depreciation. I expect gearing to come down significantly over this period and I remain hopeful of a special divvy, but this probably won't be until FY22.

In the meantime this review significantly enhances their ability to pay ongoing annual dividends at the current level.
Gross yield at $2.41 is (22/0.72) / 241 = 12.7%

Good to see that the recently commenced Chicago route has already grown to the point where they are putting on extra capacity from later this year and a new route to Seoul as well as more capacity to Teipei gives encouragement. Good to see guidance reaffirmed once more.

I think those holding off hoping to get back in under $2 are going to be very disappointed and I'm going to call it, (barring some major exogenous shock) the bottom on this cycle has already been put in. As usual I will listen into the conference call and share any further thoughts after that.

I retain 100% confidence in the management and board and believe they are doing a very good job in what have been very challenging conditions over the last year or so. Happy to buy even more on any irrational further weakness. I would expect to see $2.50 by close of business tomorrow if not sooner but time will tell.

[oldtech]

I do wonder what the market reaction will be to lower growth figures - they are planning for network growth of 3% to 5%, on average, over the next three years, revised down from 5% to 7% to reflect slower growth.

[Beagle]

Many other business can only dream of 3-5% annual growth in this economy. PE is only ~8 and I think we are talking bottom of the cycle stuff here and that's the PE that normally applies at the top of the cycle !
http://www.sharechat.co.nz/article/9...ing-demandhtml

[oldtech]

Certainly Mr Market is happy, up 8.5 cents already.

[Beagle]

I'm not surprised and as posted earlier expected to see $2.50. Its good to see them concentrate on capex and cost efficiency and I think a focus in this area is overdue.
Pleasing to see two wide bodied aircraft (really capex expensive) deferred for ~ 5 years and overhead targeted cost reduction of ~ 5%.
Also good to see a 2 year program of looking for operational cost efficiencies. All this is very good strong bean counting stuff and confirms to me that the board and management are doing a very good job of managing what is a very complex business.

$2.23 was the low and anyone who bought there or thereabouts was as cunning as a hungry Beagle

[Blue Skies]

With bank deposits diminishing even further, Air NZ with it's v high yielding dividends, will attract a lot of money chasing income & rightly so in mho. Just a few of the reasons -
It's one of the best in it's industry in the world, due to NZ's unique geographical position we are always going to be absolutely dependent on a healthy thriving national airline (the tourism industry/govt would never allow us to be solely at the beck and call of foreign carriers, it would be unacceptable risky for tourism & a large dependent sector of the economy ), as a major shareholder the govt needs continuing juicy dividends, the major shareholder NZ Govt also just happens to control the policy levers if needed, it's still making around $1M profit per day & a PE of 8. I wish a few of my other shares could claim some of these criteria.

[madmat]

I'm not surprised and as posted earlier expected to see $2.50. Its good to see them concentrate on capex and cost efficiency and I think a focus in this area is overdue.
Pleasing to see two wide bodied aircraft (really capex expensive) deferred for ~ 5 years and overhead targeted cost reduction of ~ 5%.
Also good to see a 2 year program of looking for operational cost efficiencies. All this is very good strong bean counting stuff and confirms to me that the board and management are doing a very good job of managing what is a very complex business.

$2.23 was the low and anyone who bought there or thereabouts was as cunning as a hungry Beagle

I got in a little early before the low at $2.34

[winner69]

Wonder how much ‘influence’ the majority shareholder in these decisions seeing cash is the key

Luxon and his team a bit slow of the mark though .....the signs of market growth slowing were there a couple of years ago and they didn’t react. A couple of demerit points to the CEO there. A

[Beagle]

They had a 56% gearing ratio at the half year which is slightly above their targeted ideal level so it looks like good common sense pragmatic decision making to defer some capex and tune the business efficiency up for the current market conditions. Improved product offer coming recognising long haul economy is too cramped also good to see and good investment in upgraded lounges. I'm very happy with how they're running the business.
Litigating against ZEL for the fuel pipeline disruption for ~ $4m is something I wonder about the merits of but its chump change in the overall scheme of things and gives their new general counsel something to get their teeth into...(although frankly I would rather see AIR get their teeth into Rolls Royce).