AIR - Air NZ.

[Xerof]

Ok thanks W69, I should have bothered to look myself lol. So they buy jet fuel but hedge Brent, presumably relying on the strong correlation on differentials.

Here's a chart (second one) that shows the differentials/correlation
http://www.iata.org/publications/eco...velopment.aspx

looks to me that $55 for jet fuel will be tough to achieve going forward, especially given the forward curve is in contango, but it's not the end of the world at this stage.

discl: still long from low 2's cum divs, and added more at 1.80 ex divs

[Beagle]

** Based on a fuel price of US$55 per barrel for the remainder of the year.

Extract from annual result announcement.

Ahhh, yes, my bad. Current spot price for Brent Oil this morning was $54. They have good hedges in place so overall for the year taking into account very low Q1 fuel costs I am comfortable with their assumption of an average of $55 for jet fuel. As you were gentlemen, back to the middle of the forecast range then ($500m before tax), until we hear something different

[Joshuatree]

Surprised there is no Qantas thread. if one has $A looking for home and yield this is a worthy option."they've been buying back their shares; they don't have enough franking credits good for us until they do which will attract more aussie investors"

[Raz]

Looks all good from here this evening from a high floor at the Novotel overlooking Auckland Airport...out tomorrow on one of the AIR birds although those A380s are always tempting...

[Snow Leopard]

Surprised there is no Qantas thread. if one has $A looking for home and yield this is a worthy option."they've been buying back their shares; they don't have enough franking credits good for us until they do which will attract more aussie investors"

There is one and it is >here< but strangely if you search for 'qantas' it never appears in the results!

Best Wishes
Paper Tiger

[Beagle]

AIR's main rival in this part of the world does seem to be doing quite well. http://www.asx.com.au/asxpdf/2016103...wx313twbyv.pdf
In this market update which I don't think ? has been discussed in this thread before they're looking at $800-$850m underlying operating profit before tax on the reduced number of shares due to the buy-back of 1,874b. Looks like about $580m after tax or A31 cents per share in earnings for the first half.

On the other hand AIR are forecasting at their mid-point $500m before tax for the full year which gives about $360m after tax and on 1,123m shares = N.Z.32 cps.

Keep in mind these two companies did about the same EPS for the full year last year so we are now seeing quite a significant divergence in their earnings. It would appear that QAN's current strategy of cost control, running older tech planes in a low oil price environment and carrying more leverage in a ultra low interest rate environment as well as doing a significant share buy-back is really starting to work in terms of earnings per share. With QAN's relative outperformance (they're slowly becoming a more formidable competitor) and their business model is working extremely well given the heightened competition all carriers face.

Based on 4 traders average estimates AIR trade on a 2018 forward PE of 6.73 times whereas QAN trade on only 6.02 times.
2018 PE's for Delta are 8.2, United 9.8 and American Airlines 9.3.

On a forward dividend yield basis AIR has the comparison shot to bits. No reason that I can see why they can't pay 20 cps fully imputed for the foreseeable future. 20 / 0.72 = 27.78 cps gross which on today's closing price of $1.98 = gross yield of 14%.

The American carriers have had quite a rally in the last few months and both QAN and AIR have underperformed by comparison. How each would perform if there's some sort of market reality check, (which I think is fairly likely) is anyone's guess.

Quote 17 November 2016

From a divvy yield perspective QAN's record is shabby and FY16's final was pretty pathetic but fundamentally they're doing very well IMO.
Older fleet with less efficient planes and they use a LOT of leverage so they do well when the tailwinds are blowing but I don't think their business model is as robust as AIR's, (AIR made money throughout the GFC, no multi billion dollar losses for them, unlike a certain other carrier). AIR well positioned if fuel goes up with a very young and efficient fleet and quite moderate gearing. Lack of ability to claim back franking credits, (when available) a disincentive for Kiwi investors too.
According to 4 traders average expectations for the next 3 years put QAN on about 5.2% yield whereas AIR are on 9.5% plus imputation credits = 9.5 / 0.72 = 13.2% gross.

And speaking of Ripley's believe it or not, someone has really put the dream into the term Dreamliner
http://www.stuff.co.nz/travel/themes...tarter:taboola

[Zaphod]

How do you know those routes are profitable? It may just be having committed to a capital investment it has to be utilised. If the A380 was a profitable aircraft then there would have been further orders for them. New orders and Airbus would still be manufacturing them. It was quite the contrary orders were cancelled. Filling an A380 to capacity does not mean it's making a profit. It all depends on the yield. There are numerous operating constraints ($$$$) it incurs related to its size.

Airlines such as Emirates have proclaimed the fact that the A380 is profitable in industry magazines. Airbus, who are obviously anxious to quash rumours of their unprofitable nature, have also used these airlines as examples of how the aircraft should be utilised. There have however been a number of airlines (SQ springs to mind) that deployed A380's onto routes that were not optimal for that aircraft and suffered accordingly.

There are simply far too many variables at play to claim that the A380s are unprofitable based solely on the fact that orders were cancelled.

[reacher]

Airlines such as Emirates have proclaimed the fact that the A380 is profitable in industry magazines. Airbus, who are obviously anxious to quash rumours of their unprofitable nature, have also used these airlines as examples of how the aircraft should be utilised. There have however been a number of airlines (SQ springs to mind) that deployed A380's onto routes that were not optimal for that aircraft and suffered accordingly.

There are simply far too many variables at play to claim that the A380s are unprofitable based solely on the fact that orders were cancelled.

Speaking to a pilot friend who recently left his job flying with Emirates, the A380's struggle to make a profit because although they can sell the extra seats, they lose revenue on cargo. The baggage and cargo hold isn't as large per passenger as the 777 or similar, and it is not uncommon for Emirate to charter a cargo plane following an A380 just to take passenger luggage!

This, and the double maintenance expense of 4 engines are the reason why airlines are cancelling orders. Its also a pig of a plane to fly, so I am told...

[winner69]

Speaking to a pilot friend who recently left his job flying with Emirates, the A380's struggle to make a profit because although they can sell the extra seats, they lose revenue on cargo. The baggage and cargo hold isn't as large per passenger as the 777 or similar, and it is not uncommon for Emirate to charter a cargo plane following an A380 just to take passenger luggage!

This, and the double maintenance expense of 4 engines are the reason why airlines are cancelling orders. Its also a pig of a plane to fly, so I am told...

A cargo plane following alng behind with luggage .........sounds like one of those taxi shuttles with a trailer for the bags

[Subway]

Speaking to a pilot friend who recently left his job flying with Emirates, the A380's struggle to make a profit because although they can sell the extra seats, they lose revenue on cargo. The baggage and cargo hold isn't as large per passenger as the 777 or similar, and it is not uncommon for Emirate to charter a cargo plane following an A380 just to take passenger luggage!

This, and the double maintenance expense of 4 engines are the reason why airlines are cancelling orders. Its also a pig of a plane to fly, so I am told...

Charter a cargo plane to take the luggage? that doesn't make any sense, theres plenty of room for baggage, if anything, they would be chartering a cargo plane for, well, you know, cargo.