Auckland International Airport Limited (AIA)

[Waltzing]

"(principally as a result of investment property revaluations)"

a better KIP.

[peat]

worked as a good hedge on AIR short. in fact a lot better so far haha

[Maxtrade]

Has there been some news which would explain why AIA has been rallying strongly today?

[macduffy]

Has there been some news which would explain why AIA has been rallying strongly today?

Probably just slowly growing confidence that air travel is going to resume - some day!

[Maxtrade]

Probably just slowly growing confidence that air travel is going to resume - some day!

When boarders open, subsequently NZ will first be exposed to seeing the true effects of Covid. We are 6-12 months behind the rest of the world in this aspect. On one hand we might expect tourism to flow. On the other we will start seeing 1000'2 more cases and it won't take long at all before our limited ICU beds, doctors and nursing staff, ventilators etc are at max capacity. In turn we will start to see what it really means to have Covid. Up until now we have been shielded. Even if we do reach 90% vaccination rates we will still likely see these events play out seeing we are not as well equiped in NZ compared to the medical capacity in the states for example.

So although boarders might be open once we start seeing the health system get overwhelmed it may have a negative affect on tourism due to the situation we will be in. Which also may result in lockdowns being re-established if our hospitals aren't coping.

Would anyone agree it might be premature to see AIR and AIA share prices heading north prematurely here. It is good to be positive and optimistic, but at the same time we have a lot of reality to deal with ahead. NZ is small, limited health system capacity, this is what is different and may still affect our tourism market for longer than some may realise.

[BlackPeter]

When boarders open, subsequently NZ will first be exposed to seeing the true effects of Covid. We are 6-12 months behind the rest of the world in this aspect. On one hand we might expect tourism to flow. On the other we will start seeing 1000'2 more cases and it won't take long at all before our limited ICU beds, doctors and nursing staff, ventilators etc are at max capacity. In turn we will start to see what it really means to have Covid. Up until now we have been shielded. Even if we do reach 90% vaccination rates we will still likely see these events play out seeing we are not as well equiped in NZ compared to the medical capacity in the states for example.

So although boarders might be open once we start seeing the health system get overwhelmed it may have a negative affect on tourism due to the situation we will be in. Which also may result in lockdowns being re-established if our hospitals aren't coping.

Would anyone agree it might be premature to see AIR and AIA share prices heading north prematurely here. It is good to be positive and optimistic, but at the same time we have a lot of reality to deal with ahead. NZ is small, limited health system capacity, this is what is different and may still affect our tourism market for longer than some may realise.

Sure - you paint a quite probable scenario.

I see however a couple of issues in your argumentation chain:

1)
Markets are not rational. They don't behave like you (or anybody else) might think makes sense, they follow the majority view of whoever shapes the market at a time (i.e. the people with goods and the people with money). Many people out there (probably including the both of us) are seen by somebody else as plain awkward and crazy ... hey, there are a lot of crazy people around, aren't they?

Markets typically behave like flocks of horses ... they poo onto their food, they poo into their water and when there is a loud noise they just start running, no matter whether this is a good idea or not.

2)
Nobody can predict the future, particularly in a situation which was not around before.

While the scenario you are painting does have in my view a reasonable likelihood to occur - we don't really know for sure, do we?

Was it Merck recently presenting a quite cheap cure for Covid (https://www.cnbc.com/2021/10/01/merc...eatment.html)? Maybe this is fully tested and approved next year? As well ... so far all previous pandemic's used to disappeared after some time again ... even the Spanish flu was after something like 2 to 3 years not a problem anymore (and this without vaccinations and just with Aspirin to "cure"). Of course, we don't know how Covid plays out, but maybe being optimistic is not more unrealistic than being pessimistic.

3)
The value of companies like AIA and AIR is measured in terms of long term earnings potential ... and while I still have my concerns related to AIR (too much debt), does it really make for AIA's DCF a big difference whether they have for the next 2 decades 20 or just 19 good years?

So - I think one can make a case (at least for AIA) for rising prices and while I admit that I find them to dear, this was almost always true.

Anyway - no point in arguing with the markets or trying to convince everybody from your point of view. If you think markets are wrong (and you well might be right, they often are), than you should short both companies ... just remember - never invest more money into shorts than you are happy to lose ... they say markets can behave irrational longer than you can stay solvent .... and boy, are they right .

[Maxtrade]

Sure - you paint a quite probable scenario.

I see however a couple of issues in your argumentation chain:

1)
Markets are not rational. They don't behave like you (or anybody else) might think makes sense, they follow the majority view of whoever shapes the market at a time (i.e. the people with goods and the people with money). Many people out there (probably including the both of us) are seen by somebody else as plain awkward and crazy ... hey, there are a lot of crazy people around, aren't they?

Markets typically behave like flocks of horses ... they poo onto their food, they poo into their water and when there is a loud noise they just start running, no matter whether this is a good idea or not.

2)
Nobody can predict the future, particularly in a situation which was not around before.

While the scenario you are painting does have in my view a reasonable likelihood to occur - we don't really know for sure, do we?

Was it Merck recently presenting a quite cheap cure for Covid (https://www.cnbc.com/2021/10/01/merc...eatment.html)? Maybe this is fully tested and approved next year? As well ... so far all previous pandemic's used to disappeared after some time again ... even the Spanish flu was after something like 2 to 3 years not a problem anymore (and this without vaccinations and just with Aspirin to "cure"). Of course, we don't know how Covid plays out, but maybe being optimistic is not more unrealistic than being pessimistic.

3)
The value of companies like AIA and AIR is measured in terms of long term earnings potential ... and while I still have my concerns related to AIR (too much debt), does it really make for AIA's DCF a big difference whether they have for the next 2 decades 20 or just 19 good years?

So - I think one can make a case (at least for AIA) for rising prices and while I admit that I find them to dear, this was almost always true.

Anyway - no point in arguing with the markets or trying to convince everybody from your point of view. If you think markets are wrong (and you well might be right, they often are), than you should short both companies ... just remember - never invest more money into shorts than you are happy to lose ... they say markets can behave irrational longer than you can stay solvent .... and boy, are they right .

Thanks BP. Yeah markets can have a mind of their own. Still quite likely being a bit too optimistic prematurely with the head winds in store for a country that hasn't even really yet experienced the influx of the inevitable Covid. I agree AIR debt should surely be scaring anyone away from buying in at where the SP currently is. Could be a rude awakening for those investors once debt is realised early next year and Cap Raise commences, diluting shareholders further. Government will buy them out of debt basically, but at an SP well below where it currently is. Cap Raise sub $1 likely. Then the proceeds of the Cap Raise AIR will need to use to pay their debt back off to the Government. Win win for the government, not the best for shareholders having bought in 1.5 and higher. Seems irrational the SP is heading north 1.7. But like you say markets might just be following a heard to a dry trough that leaves them running to the next watering hole. Hope not but we will see.

AIA should really be placed where it was recently sitting low $7's. With a lot of the big airlines limiting their NZ flights to recoup losses even when boarders reopen in 2022 will more than likely be 2023 by the sounds of it before AIA sees any real traffic of substance. SP should hover low $7's until we see how it pans out come start of 2023. Rallying top to $8 now seeing a bit too optimistic and likely see a drop back to $7 with any bit of negative news. Which will be a definite when NZ starts experiencing 1000's of cases, which is 100% inevitable. Unless we live with Auckland in perpetual lockdown due to inadequate health services. Either way is sadly not ideal but a reality. Definitely need to be a risk taker buying in AIA at these current levels with so much risk still down the pipeline. But good to see the optimism. Hope is a good thing and best of luck to holders. Personally will wait for cases to start really being seen in NZ which will come hand in hand with AIA and AIR shares spiralling back down again off the back of this recent optimistic rally. Australia isn't any better.

[Animeart]

Will case numbers matter anymore once we hit the 90% target? Look at how UK & US are opening up already, despite having high number of cases still. Not to mention counties moving ahead with 3rd booster shot next year. I certainly don't think AIA is worth $8, only about $1 down from its pre-pandemic. At the start of 2020 it dropped to as low as $4.xx I think. I'd personally be more comfortable buying in at $5-$6 unless the Outlook for border opening changes significantly for the better.

[iceman]

Covid 19 Delta outbreak: Risk NZ will fall off the radar for airlines
https://www.nzherald.co.nz/business/...ectid=12476919

[Maxtrade]

Covid 19 Delta outbreak: Risk NZ will fall off the radar for airlines
https://www.nzherald.co.nz/business/...ectid=12476919

Yes some of the bigger US and EU airlines won't even be entertaining resuming NZ flights until possibly 2nd or 3rd quarter 2023. A lot of hurt still yet to come for AIA and AIR. Good to see the optimists though with SP taking a short rally recently. But in all likelihood will see the SP drop back down again soon enough. I think FOMO with investors seeing a short rally and jumping on board, but seeing volumes tapper back and resistance levels hit on both now will likely see short term profits taken loosing momentum and in turn a reversal on the SP trend to lower lows than recent for both. Especially when there is a little bit of negative news when case numbers start spreading and rise considerably will likely be the reversal catalyst. It's not a matter of if this happens, it's when. Unfortunately for us all Covid hasn't even opened the door really for us here in NZ yet. When we start seeing 100's of cases a day take note of what SP in AIR and AIA will downtrend then (if not sooner).