AIR - Air NZ.

[sb9]

Me neither cdonald, sorry. Will leave it for experts to comment like Roger may be?

[Beagle]

Op stats for Jul and fuel hedge disclosure...

https://nzx.com/companies/AIR/announcements/268787

https://nzx.com/companies/AIR/announcements/268788

I am happy with July's operating stat's. With a slightly softer economy AIR's marketing team are doing a fine job of filling the planes. RPK's up 9% in a soft economy while maintaining yield's is no mean feat in this economy.

sb9, not up on hedges etc, what does the second announcment mean in regards to hedging fuel. thanks. chris

In a nutshell AIR's policy is to manage their fuel cost through the derivative markets. They do this using a variety of tools, futures options and collars. Collars are an instrument which as you can imagine tried to collar a certain amount of forward oil within a certain price range.

As you can imagine, seeing that the oil price has basically fallen to a 7 year low, AIR are out of the money, (a paper unrealised loss) on the mark to market value of all their derivative's , as are all airlines that forward cover part of their oil.
As at 14 August they were out of the money by $32m in total. While this seems a lot it needs to be kept in mind that they are contemporaneously enjoying the benefit of record low spot prices for fuel so the latter far outweighs the former.

Roughly speaking on average, over time you'll see that AIR tends to cover about half of their anticipated fuel needs through forward cover and uses spot prices for the other half. In a basic common sense way, this is simply a risk management tool to mitigate the effect of sudden movements in fuel prices over the foreseeable future.

Speaking with the CEO at last year's annual meeting, they're in the airline business, not fuel speculation business so they'll back themselves to be nimble enough to adapt to changing market dynamics rather than take big long term bets on the long term future direction of fuel.

Hope that helps explain the situation. If you go through the table in detail you'll see they break the year up into four quarters and disclose their position for each quarter and then mark to market their entire position at the foot of the page.

There's nothing in their fuel price hedging or July Operating stat's that concerns me. Well run business that's being run on a business as usual basis.

[sb9]

Thanks for that Roger

[tony64peter]

Most of AIR's profit soon to be released is from fuel.

[couta1]

Dump truck backed up on closing( Sold my GNE to do it) my plane will have to ditch some fuel to get off the ground now, hopefully we get a Spark type rise come next week, should be a cracker.

[KiwiGekko]

Dump truck backed up on closing( Sold my GNE to do it) my plane will have to ditch some fuel to get off the ground now, hopefully we get a Spark type rise come next week, should be a cracker.

A bump like Spark got today would be certainly be appreciated. :-)

I thought the AIR SP held up well today and am looking forward to Wednesday morning's announcement... Only 2 days of trading until we find out.

[couta1]

A bump like Spark got today would be certainly be appreciated. :-)

I thought the AIR SP held up well today and am looking forward to Wednesday morning's announcement... Only 2 days of trading until we find out.

Yep that would put it up near the $3 mark but depends whether it's an instant rise like Spark or a delayed reaction by a day or two.( I guess it all depends on their divvy guidance etc)

[Beagle]

Dump truck backed up on closing( Sold my GNE to do it) my plane will have to ditch some fuel to get off the ground now, hopefully we get a Spark type rise come next week, should be a cracker.

LOL you're a punter mate. The company has recently guided to a tight range of $520-$530m operating profit before tax and VAH's negative contribution so I'm not expecting any major divergence from that and you all know I'm the biggest AIR enthusiast on here. In my view the shares are very good value at the current circa $2.70 and the management are doing a superb job as are the marketing team in keeping the load factors strong in a slightly softer economy but I'm not expecting any major re-rating because of the result next week. Very good long term hold but I maintain a balanced and normal portfolio position. All the brokers at this stage are forecasting a drop off in profit in 2017...and I predict they'll all get egg on their face as oil stays lower for a lot longer than anyone's currently forecasting and AIR continue to generate cheap fuel enhanced profits. Long term I see low / mid $3 range but I would caution that plenty of patience will be required. Good fully imputed dividends means its easy to be patient.

[couta1]

Roger I think their result should produce a bigger lift in share price than GNE which I'm picking will be relatively uninspiring other than the divvy. PS- You right about the punting but you can't win if your not in aye.

[Beagle]

I LOVE to punt too mate but I find that if I take anything bigger than a 10% portfolio position in any one stock I start to worry too much so I've had to accept that a more balanced and diversified investment approach suits me better.