AIR - Air NZ.

[Snow Leopard]

...
What to do with all that cash ?
Last year cash flow from operations was a remarkable $1.1b, just on $1 per share ! Tony Carter after the ASM mused that perhaps this is the highest operating cash flow of any NZX company ?
Yes they have a $2.6b fleet upgrade program over the next 4 years but normal depreciation with the expanded fleet size will be approx. $1.8b over this period so by my estimation so that's really only a net outlay in the order of $600m after fleet disposal proceeds from the 767's and Beechcraft 1900's. Further, some of the new acquisitions will be by way of operating lease not purchase.
But wait there's more ! Some of the cost of the two Dreamliner's that came online in early FY16 was funded by up-front payments in FY15 and they specifically mentioned they'd made more advanced payments on these aircraft (implying more than normal), to gain further discounts from Boeing so the politically correct speak of $2.6b of new fleet isn't really going to drain cash flow at all !
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Last year every cent and more of that operating cash flow was spent on 'Acquisition of property, plant and equipment and intangibles', and over the last few years such expenditure has been high. Looking forward a few years then one would expect that there will actually be some reasonable free cash flow as a result of this prior investment, though the timing of payments for assets and of any special dividends is uncertain.

FYI depreciation is not a cash item per se, although it is a tax deduction and thus you do get some of the cash back.

There are further misconceptions in your statement.

The polite speak for the statement "the politically correct speak of $2.6b of new fleet isn't really going to drain cash flow at all" is that you are mistaken.

AIR is in a good position yes, but don't get carried away.

Best Wishes
Paper Tiger

[winner69]

Geez Roger,I knew you were banned ....but Siberia?

PS -I dont think anyone will argue with the balance sheet atm--but I wonder about their marketing strategy and pricing (they can always drop prices if necessary though)

Skid - if you were Mr Luxon what would your strategy be in these times when all airlines can make a fortune (even if flying old panes)

[theace]

787 stuck in Fiji

http://fijisun.com.fj/2016/01/17/tro...irways-hangar/

[brend]

Seen AIR's global new year sale which has been advertised for well over a week?

L.A. for $559 Buneos Aires for $699 e.t.c.

lowest prices i've seen for years.

Yip - could've saved myself $200 by waiting until New Year.

787 stuck in Fiji

Not very good for a plane only 3 months old.

https://www.planespotters.net/airframe/Boeing/787/37964/ZK-NZH-Air-New-Zealand

[Beagle]

Hi Brend,

Happy new year mate.

The odd teething problem with any new aircraft is to be expected e.g. each Rolls Royce jet engine has 30,000 individual components.

Some people seem to be forgetting that AIR acquire a lot of their aircraft on operating lease and that their credit rating was raised last year due to the robustness of their balance sheet and strength of their operating performance.

[skid]

Skid - if you were Mr Luxon what would your strategy be in these times when all airlines can make a fortune (even if flying old panes)

I would keep my prices competitive

[Raz]

I would keep my prices competitive

That is the entire point, in the past when another airline had a sale you more often than not could look up the Air NZ web site and they would have a similar priced deal which was not advertised. Also their Auckland centric pricing has lost them some customers from other places i.e certainly flights to europe & asia ex Christchurch via Singapore airlines and Emirates.

[skid]

That is the entire point, in the past when another airline had a sale you more often than not could look up the Air NZ web site and they would have a similar priced deal which was not advertised. Also their Auckland centric pricing has lost them some customers from other places i.e certainly flights to europe & asia ex Christchurch via Singapore airlines and Emirates.

those are 2 airlines that all things being equal would win out from their quality and comfort.(something AIR should strive towards-(not to say they are horrible,but..)

I think MAL is around $1100 to southeast Asia--if they are the most competitive (of the full service) Ill check to see if AIR have a similar price as a matter of interest---(I wonder what would happen if they offered shareholders a discount?--Now that would be interesting)

[iceman]

If AIR adjusts its prices and becomes competitive the of course everyone will give it serious consideration--simple as that(but unless the planes are not full, and the cheaper prices fill them the balance sheet will suffer a bit --its a catch 22.

Our company has attempted 7 bookings recently on the new AKL-EZE route. 4 times economy seats and each time they've been fully booked. Others business class and been available but a short notice booking last week got the last business class seat. Should note that we always need to book at short notice but my preliminary observation is that load factors on this route are very healthy.
Our people very happy being able to fly directly after years of having no options but LAN via Santiago. Will be using this route myself in about 3 weeks and look forward to observing and experiencing it.

AIR entering this route has also seen competitors lower their prices significantly, which is great.

[winner69]

Airline margins at 50 year highs

http://www.smh.com.au/business/aviat...18-gm822b.html