AIR - Air NZ.

[biker]

I think also that if Virgin Australia get Tiger sorted and profitable and eventually realize the potential that Air and the other two big players think they have, there will be upside there also.
Air buying more in the cash issue at 38 cents averages down their entry cost and with good management and a strengthened balance sheet the Virgin/Tiger combination could really take it to Qantas. They do of course, have to get it right and that does add to Air's risks.
Airlines - Not for the faint hearted and always cyclical.
Disc: Hold AIR and VAH and applying for more Air in the sell down so I'm biased.

[peat]

The main thing I wish to understand about this sale is whether the government is recouping its bail out costs of 11 years ago.

They paid 885 million back in 2002 according to http://www.nzherald.co.nz/business/n...ectid=11158715
An article from back then http://www.nzherald.co.nz/business/n...bjectid=786800 described the recap as:

The programme was in two parts - a $300 million loan and a $585 million investment. The loan was by way of 1.25 billion convertible preference shares at 24c each and the investment by 2.167 billion ordinary shares at an issue price of 27cps.

Are these the same ordinary shares as back then?

Is anyone close enough to this company to evaluate the success of the governments 'investment'.

[macduffy]

Does it really matter though, peat?

If we accept that the bail-out was necessary in the overall interests of the country in the circumstances of the time and if we think that now is a good opportunity to sell down the nation's interest in a highly volatile investment - I do! - then it doesn't really matter what the original cost was. At least, that's how I'd try to approach a similar situation in a personal investment. ie the original cost of an investment is irrelevant in determining when to sell. ( I know, it's easier to say than to put into practice!)

[winner69]

Yes they paid 27 cents .... been a 5 for 1 as well s a 1 for 6 rights since ... so now about 130

There were also heaps of prefs that converted to ords along the way

So could ay they have done sort of OK over 12 years .... prob why Buffett says airlines are dogs if this is what the best in breed can do as an investment

[peat]

thanks winner69.
fair comment macduffy, I just like to have an idea of these sorts of things as part of the economic history.
The weird aspect of this company is the flagcarrier status and hence the effective underwriting by govt.

But airlines are not really a buy and hold sector imo so not particularly appropriate for most retail investors.
Possibly the insto demand will support it. I hear ACC is rolling in dosh. They're into risky stuff. I remember them buying Chase at $9.
Super Fund might take a few but shouldn't think they'll be too keen. If somehow they were though, wouldn't it be great as an incentive for Kiwis to fly with their homegrown airline (supporting their own super).

[percy]

thanks winner69.
fair comment macduffy, I just like to have an idea of these sorts of things as part of the economic history.
The weird aspect of this company is the flagcarrier status and hence the effective underwriting by govt.

But airlines are not really a buy and hold sector imo so not particularly appropriate for most retail investors.
Possibly the insto demand will support it. I hear ACC is rolling in dosh. They're into risky stuff. I remember them buying Chase at $9.
Super Fund might take a few but shouldn't think they'll be too keen. If somehow they were though, wouldn't it be great as an incentive for Kiwis to fly with their homegrown airline (supporting their own super).

I find Jetstar web site easier to use, and Jetstar deals are better than AIR's.
Would not buy Qantas shares however.

[Zaphod]

I don't entirely buy into the "avoid " airlines at all costs" philosophy, even though Warren Buffet is much smarter than me, but I made the decision to sell out at around 158c.

Three key reasons:
1. Declining standards. I travel to Asia and UK 5-6 times per year and Australia about the same, travelling AirNZ on almost every occasion over the last 5 years. Earlier this year, I travelled to the UK on Cathay and felt their planes were better and their staff just as helpful etc. AirNZ planes (especially on the Asia routes, can't comment re USA) are looking and feeling really tired. My latest trip to Europe was on Singapore airlines; $3K cheaper, more modern planes, lovely staff, on-line check-in.

Many of the Asian routes are serviced by older 767s which would have been retired years ago if it were not for the delays in the delivery of the new 787s. Both the 777-200ER and 777-300ER's used primarily on the US/Canada routes are modern and overall, very pleasant aircraft to travel in IMO.

I too would rate both Cathay Pacific and AirNZ staff equally helpful, however personally I found Aircraft hard products on the AKL-HKG and HKG-LHR sectors to be inferior to the NZ product. I note that Cathay Pacific have upgraded the aircraft on the AKL-HKG sector very recently.

Generally, airline fares are very similar, after all the industry is incredibly price sensitive and drawing comparisons is very difficult without knowing what fare category you were purchasing in, especially if razor-sharp specials were being offered at the time.

Just my two cents!

[Zaphod]

Just to add to some of the more upbeat comments above, AirNZ have an exceptionally strong, talented and cohesive management team who have done a great job of building an efficient and financially stable airline, with great growth prospects. From the video interviews I have watched and briefings I've attended, Christopher Luxon has a formidable understanding of the business, its challenges and a clearly defined vision for where he sees the airline heading.

As long as these elements stay consistent and they keep hitting those revenue targets, I will continue to hold.

[TimmyTP]

Many of the Asian routes are serviced by older 767s which would have been retired years ago if it were not for the delays in the delivery of the new 787s. Both the 777-200ER and 777-300ER's used primarily on the US/Canada routes are modern and overall, very pleasant aircraft to travel in IMO.

I travel on 777-200ERs to and from HK mostly and they are very tired IMO. A few years ago, they were spanking new and fabulous; now I often find seats and controllers in economy are broken & just looking worn. The business class cubicles have not fared well, with what looks like polyfilla in worn areas for some time now. Can't remember being in an AirNZ 767 so no comment about those.
Having said that, I suspect the US routes are more up-to-date; I get the feeling that's their focus and perhaps where the $ is.

Generally, airline fares are very similar, after all the industry is incredibly price sensitive and drawing comparisons is very difficult without knowing what fare category you were purchasing in, especially if razor-sharp specials were being offered at the time.

Business AKL to LHR return last month - ~NZD11k on NZ (would have been 777s all the way I think & similar price whichever route) vs ~NZD8k on SG (mix of 777 and A380 via Singapore). There appeared to be plenty of spare seats on AirNZ very close to departure (as a shareholder at the time, I was very interested so I kept and eye on it).

[QOH]

Much as I love AIRNZ, after watching the TV series about Dubai International airport, and the huge presence of Emirates I fear for the future of all other international airlines, Emirates are appearing everywhere.