AIR - Air NZ.

[skid]

Hmm - brave. Not even I would dare to compare AIR on this thread with PPL , but yes - I hear what you are saying - and from a "selfish management perspective" do I understand this point of view.

On the other hand - the shareholders of this company don't give their executives additional shares to increase the level of their "overpaid-ness", but to better align management interests with shareholders interests.

If management are however selling their shares as soon as they get them (and are allowed to do so), than they obviously work against the interests of the remaining shareholders, which makes me wonder why a board allows these sort of lolly scrambles for their executives. Maybe the SP tanks because people start realizing that the company is run by a weak, incompetent or selfish board?

A board with any sense would immediately stop this lolly scramble and either cut the freebees for their execs or otherwise arrange for (a adequate) mandatory time for them to hold the shares when they get them. The current schema is just a waste of shareholder funds and contributing to the downtrend.

Or just give them a bonus--why do their lolllies have to be at the shareholders expense?-One buys shares(become a part of a company)just to find you part has been diluted with more shares and your ''part'' suffers as a consequence.

I cant comment on the companies performance,but i can say there are some real bargains out there,as Im sure all have seen.
With less income(ticket price) they are going to have to fill those planes.
For this years Southeast Asia trip ,I was able to get on my favorite airline (Thai Air) for alot less than my second choice last year (even with an extra leg thrown in!)

[BlackPeter]

Is that the downtrend that you predicted would have us to 82 cents by now BP

Incentive schemes have to be viewed in the context of international norms in this industry. Mr Luxon's base salary for 2016 was $1.47m, short term incentive $1.617m, (I presume a cash bonus), performance rights valued at $808.5K, restricted share rights valued at $700K and superannuation benefits of $120.4K, source page 62 2016 annual financial results.

He's delivering the results, unlike Virgin. May I suggest you do some research on the package that the CEO gets for Virgin and Qantas before making any more disparaging remarks about the board or management. You are talking about a board who's chairman has received some of the highest accolades to be bestowed on any business leader in N.Z.

Further to my comments in response to JT's post yesterday its worth noting that AIR has paid 45 cents per share in fully imputed dividends this year.
The SP performance this year in my view is as much a function of fear over greed as anything else. The market dislikes uncertainty and its the uncertainty created by significant amounts of new competition on AIR routes and the impact on yield that's caused the SP to drop in my view.

Look Roger, I notice that we seem to have different views about the mid term outlook for AIR ... and I guess this is o.k. If everybody would predict the same results for any stock, than we hardly would have a market.

Just to have a look at the bigger picture:

Attachment 8489
chart courtesy to yahoo.

Not sure about you, but I would call this a so far unbroken downtrend (and yes, I've heard all the arguments about the special dividend). And sure - most downtrends end at some stage with a trend change (unless they don't, but I don't see at this stage the latter risk for AIR) - and hey, this might be now. On the other hand - if I just look at the dropping (I know, but still nice) EPS predictions and the increasing competition and market volatility would I say that at this stage it is more likely the trend continous to stay for some time below the MA200.

Anyway - time will tell.

Related to the executive salaries - I personally think they are outrageous bordering on indecent, but I know that there are other companies paying still more to their execs. I know as well that there is normally no correlation between the pay rate and the performance of a CEO ... while some might be worth the money they are paid, many are just lucky (until they are not) and I am sure that we both don't need to think too hard to come up with lots of examples for highly paid and unqualified executives.

Remember - Buffett said once something like "better to own a company with an average manager in a good industry than a company with a good manager in an average industry". Sort of puts the reason for high wage packages into perspective - doesn't it? ... and I am not even sure, whether aviation would qualify for Buffett as a good industry.

Anyway - back to AIR: not sure in which category I would put AIR board and management, but the use of their bonus share system points at least to some weaknesses in its current board and management team.

[bull....]

I think there announcement of incentive scheme very positive for share price, clear boundaries to perform

[Raz]

Hmm - brave. Not even I would dare to compare AIR on this thread with PPL , but yes - I hear what you are saying - and from a "selfish management perspective" do I understand this point of view.

On the other hand - the shareholders of this company don't give their executives additional shares to increase the level of their "overpaid-ness", but to better align management interests with shareholders interests.

If management are however selling their shares as soon as they get them (and are allowed to do so), than they obviously work against the interests of the remaining shareholders, which makes me wonder why a board allows these sort of lolly scrambles for their executives. Maybe the SP tanks because people start realizing that the company is run by a weak, incompetent or selfish board?

A board with any sense would immediately stop this lolly scramble and either cut the freebees for their execs or otherwise arrange for (a adequate) mandatory time for them to hold the shares when they get them. The current schema is just a waste of shareholder funds and contributing to the downtrend.

Weak, self severing governance..world class companies do not allow you to vest so easily...AIRs approach is far from the norm.

[Beagle]

My view is with the enormous size of the final dividend 35 cps including the special of 25 cps which is unprecedented in the airline's 76 year history, to do anything other than adding back in such a huge special into the chart gives a disingenuous view of historical SP performance, (i.e. the chart is technically incorrect). While I acknowledge that some will have differing views on this the basis behind my approach is that effectively the 25 cps special was a return of capital. As noted many months ago, 25 cents per AIR share represents the entire value of the sale of VAH which was all sold for over 30 cents per VAH share...just check the current SP of VAH at 22 cps to see if you think this was a good idea or not

BP - If you add back in the 25 cent special into your own chart there's a very clear break above the 200 day MA so your viewpoint and mine in terms of interpreting your own chart differs based purely on the interpretation of treatment of the special divvy.

AIr could have used this money in a number of ways including like QAN to buy back their own shares. QAN's buy-back, given its size could logically be interpreted to influence the share price again skewing their chart and giving a misleading interpretation of historical SP performance.

My view is a chart and interpretation of same (Technical analysis) is only as good as the information that goes into it. Removing substantial anomalous factors gives a far more technically correct picture in my opinion and substantially improves the validity of any technical analysis based on same.

Each to their own, I prefer to interpret pure data rather than data corrupted by hugely anomalous factors. To reiterate, AIR has clearly broken through the 200 day MA on a special dividend adjusted basis. Those that want to wait for their chart to break through on an unadjusted basis will need to wait a bit longer

Raz. CL's base salary $1.46m is very modest for a company turning over $5b plus with ~ 11,000 employees. VAH's Borghetti's base salary by comparison is $A1.95m, over 40% more, (currency adjusted) and just look at the relative performance of the two companies ! My opinion, if the bar was set higher to achieve vesting of shares his base salary would need to be adjusted up significantly.
Swings and roundabouts, you pay one way or the other.

[modandm]

Hi folks. Thought I would add my 2c before disappearing again for awhile. Still haven't sold a share.

Been a tough year obviously. I think most of us underestimated the impact to yields that the lower oil price/competition would bring. It's a global phenomenon. Certainly my FY17 earnings estimates have fallen from 40-45c down to 30-35c. That said the share price move down has been dramatic, leaving the company (imho) significantly undervalued, as has been the case for about the last 5 years (has it been that long...).

I certainly knew that FY16 was peak, and perhaps naively thought the dividend / cash-flow story would support the stock. Clearly the negative momentum and uncertainty on yields has mean't a tough devaluation, and risk being priced into the stock.

Where to from here then?

For the ST investor: Yield comparisons get easier in January, so should the operating stats firm up I would expect a re-rating towards 2.50, which values the stock on a reasonable 8x PE.

For the LT investor: Personally i'm not too concerned whether AIR make 28 or 32c in FY17 EPS. The question is sustainability and ideally growth in profit from there. If sustained (along with cash flow) there is a bonanza in FY19-20. I did a few figures and have spoken to the CFO, basically over the next 4 years (if things stay stable), AIR could pay $1.80 in dividends. That's based on a 50c special in FY19, and a 60c special in 2020 plus recurring twenty something ordinary. Over 5 years, you basically get your entire capital back, so if the stock is still at $2, you double your money (15% p.a). Any growth is cream on top.

I wouldn't be so tough on management either. Yes I agree they are too conservative, but with a government shareholder that's natural. As for the pay they are delivering so what's the problem? I would say we are lucky to have them. The new IR is good too.

Best, millimod

[couta1]

Nice to hear from you Mod, agree with your sentiments, great long term hold.

[Nasi Goreng]

two good posts here by Roger and Millimod.

But while we could debate that extra 25c divi and how it affects TA, why not just look at the chart like it is?Now I don't know how to post the picture of a chart in here but looking at the chart, the current share price is well above the 50 day SMA and has just broken through the 100 day SMA in the last week. 200 day SMA is currently at $2.28 so still a bit of a way to go but it definitely looks like the stock has bottomed and is currently recovering.

I've drawn a downtrend line from the peak in early 2016 to the peak in April and that trendline is currently at about $2.50 which is in line with a few valuations and may act as a bit of resistance if the share price gets there in the next few months.

If we are trying to guess what is going on with TA traders right now, it definitely looks to me like there is a tailwind, $2 will be the new resistance and I could see the share price increasing over the next month or so to approach the 200 day SMA. If we can get into the $2.20s by end of year, early January, it will set up nice for earnings and then there is the probable return of $0.10 divi which may act as further resistance as the share price absorbs the dividend payment. Earnings at the high end of guidance may add further support but we will all have to wait and see.

That's enough tea leaf reading for one day. Please do your own research.

[Beagle]

Hi folks. Thought I would add my 2c before disappearing again for awhile. Still haven't sold a share.

Been a tough year obviously. I think most of us underestimated the impact to yields that the lower oil price/competition would bring. It's a global phenomenon. Certainly my FY17 earnings estimates have fallen from 40-45c down to 30-35c. That said the share price move down has been dramatic, leaving the company (imho) significantly undervalued, as has been the case for about the last 5 years (has it been that long...).

I certainly knew that FY16 was peak, and perhaps naively thought the dividend / cash-flow story would support the stock. Clearly the negative momentum and uncertainty on yields has mean't a tough devaluation, and risk being priced into the stock.

Where to from here then?

For the ST investor: Yield comparisons get easier in January, so should the operating stats firm up I would expect a re-rating towards 2.50, which values the stock on a reasonable 8x PE.

For the LT investor: Personally i'm not too concerned whether AIR make 28 or 32c in FY17 EPS. The question is sustainability and ideally growth in profit from there. If sustained (along with cash flow) there is a bonanza in FY19-20. I did a few figures and have spoken to the CFO, basically over the next 4 years (if things stay stable), AIR could pay $1.80 in dividends. That's based on a 50c special in FY19, and a 60c special in 2020 plus recurring twenty something ordinary. Over 5 years, you basically get your entire capital back, so if the stock is still at $2, you double your money (15% p.a). Any growth is cream on top.

I wouldn't be so tough on management either. Yes I agree they are too conservative, but with a government shareholder that's natural. As for the pay they are delivering so what's the problem? I would say we are lucky to have them. The new IR is good too.

Best, millimod

A very warm welcome back modandm. I know a lot of people have tremendous respect for your input and really value it so PLEASE stick around and post more often. It would be much appreciated by many including myself.

[winner69]

Poor Gary - should know better than to get grumpy with Air NZ Zealand

http://www.stuff.co.nz/entertainment...-for-two-years