And that is a key - cheap oil allows airlines with thirsty planes to compete easier.
If oil went back up many would stop flying some of the routes they do - competition would decrease.
Printable View
https://www.ft.com/content/36f5f2dc-...7-59b4dd6296b8
This is not an AIR problem, but the recent interruptions for BA are a welcome reminder how easy it is in the airline industry to lose hundreds of millions literally over night through an "out of the blue" event. And its not even necessary for a plane to crash - sounds like BA didn't plan for sufficient backup power supplies for their IT systems (or they didn't work).
While we don't know the cost of the tab yet for BA, a much shorter and similar interruption for Delta (only 8 hours) accrued to a loss of $100m.
Maybe a high risk premium is appropriate for such an industry - just imagine the wrong power supply for an AIR computer browning out ....
A few years ago I had a tour of the AIR computing center and spent some time in interviews with various staff there, I was impressed with their thoughtful approach to mediating certain types of events, multiple cable entry/exit systems for the building, additional capacity wiring etc. I seem to remember backup diesel generators being a "standard" fixture for them.
Been there, done that:
http://www.stuff.co.nz/business/indu...BM-over-outage
I'm sure they learned from the experience (I'm equally sure that IBM learned as I'm pretty sure they lost the contract).
The questions for any business are
where is your backup data center and/or where is disaster recovery data center?
When did you last actually try to use it?
An IT power supply issue should not bring any company to it's knees!
Even I now have backup servers [in different countries] running my critical software.
Best Wishes
Paper Tiger
True that.
May point, in case it is missed, is that I have seen a lot of people do all sorts of things about data security and then find their company on its' knees because a cable was cut and they have lost Internet access.
They then complain loudly but the fact remains that they didn't plan properly - they didn't understand what ran their business.
I knew a dude who was working in IT at Cullen Airlines at the time Ansett went under.
He used to regale us with tales of horror about the rush moving all the IT backend from Melbourne to Auckland overnight.
Boop boop de do
Marilyn
Institutional Investor day on Thursday 1 June. Cat about to be let out of the bag regarding implied or explicit guidance upgrade ?
And on that occasion management were selling left right and center. This time so far there's just the one recidivist offender. I expect they'll confirm what "blind freddy" can see from the monthly operating stat's that yields are improving and overall things are better than expected. Probably an implied upgrade rather than an explicit one.
looks a bit toppy
Totally agree. Most of the market looks that way at the moment. I've noticed profit taking across most of the stocks im monitoring, 100k here 125k there just enough to not panic the market, but its a repeating pattern...
Whats that saying.. feeding the chickens, fattening them up for...
Nothing of the sort. Investor day tomorrow will shed some light.
Emirates has decided to cut it's daily Airbus A380 flights between Auckland and Sydney, in turn Qantas will upgrade some of it's Boeing 737 flights to Airbus A330.
Whilst this is not good news for consumers, it's probably good for Air NZ...?
https://www.ausbt.com.au/emirates-ax...s-a380-flights
Intensity of competition continues to ease http://www.nzherald.co.nz/business/n...ectid=11866931
Still remember the 10 hours I had to wait some years ago in Sydney for my Emirates flight (which had been delayed in Dubai) to hop back over the ditch. I'd say that doing this last mile with Qantas must be a win-win for everybody and given my recent experience with Qantas - they significantly managed to improve their standards. I think this is good for everybody and if demand increases I am sure that Qantas can easily throw in another plane ...
Profit upgrade as expected in the investor day presentation...the question is do they deliver $530m or $550m+
Maybe can push past $3 next month or two
That previous guidance was always a load of codswallop. Roger and myself saw through that when they came out with it. No way was H2 going to be as bad as they implied.
The market per se saw through it as well - that's why the share price is close to $3
Now AIR have actually come clean certainty prevails and yes $3 plus soon
I'm still sticking to my forecast $550m to $600m (including Virginngain)anything
Will be 2nd best year in their long history
Who would want to be an analyst / investor - must be really hard work to sit and fully concentrate for 3 hours listening to Chris and his team rave on. Even the pretty slides wouldn't keep me awake. Chris will love it though - gets to use all the buzzwords
They probably get a decent lunch at the end of it to make it worth while - and it's a good excuse to get out and meet their peers.
Get an invite Roger?
Anything else could push the sp apart from the upgrade?
525+ Million, but until the final figure is known, there's an awful lot baked into the current SP IMO.
Look at Slide 13
https://www.nzx.com/files/attachments/259318.pdf
That's why they love their outrageous bonuses being based on relative performance to certain indices
Cool eh
* Very pleased with how they're running the company
* Very pleased they're targeting consistent dividends across the cycle, (perfect dividend hounds stock)
* Good that FY18 capex is down ~ $150m, plenty of opportunity to shrink their gearing back to the middle of targeted range 45-55%
* Very pleased with their highly disciplined approach towards future growth
* Targeting improved CASK
* Growth in loyalty programs
* Upgraded guidance as expected but still looks extremely conservative @ $$525m, I'm expecting $550 - $600m
* We appear to have passed the high tide mark for intensity of new competition and as recent entrants look to either confirm the profitability of their new route or quit
* I see a gradual ongoing improvement in the yield environment
* The recent lift in SP has solid foundations behind it in my opinion.
* Still expecting very significant special dividends in FY20 - FY22
* Expecting stable 10 cps final this year - Gross dividend yield from ordinary dividends is ~ 10% with current SP, (happy with that).
* I won't comment whether I think its worth more than $3 but have been topping up recently as high as $2.85 (speaks for itself).
be interesting to see how much the market had priced in the better performance.
I would agree and be pleased to attend but it is limited to institutional investors and analysts. Already tried to make the case for large retail holders to attend with Tony Cater in my discussion with him last year. It is what it is and to be fair at least this time retail shareholders can watch it here live http://edge.media-server.com/m/p/kuo3uxit/r/1 and website will be updated with recording later. Hopefully some of the N.Z. analysts can read the tea leaves now they've been handed them on a silver platter.
My pick is they're likely to hit $550m target at least...
That's one heck of presentation, so much to take in....need a good hour or so to go through in detail. Just flicked through highlights for now...
I agree 100%. Already my #1 investment position but I will be studying that presentation in great detail today and updating my thinking for FY18 and FY19 forecasts.
My preliminary thinking is we're headed close to $600m this year and I can't see any obvious reason that won't be replicated in FY18. That would give after tax EPS of circa 38 cps. Average ten year PE is 11. I think the market is already modelling in the specials as a given hence the most compelling medium term investment case from the divvy yield perspective. I am modelling a five year average gross dividend yield of 15% inclusive of special's.
I'll buy it again at the right price, at its current price it's not a stand out from a few other high divvy payers on the NZX. Looking ahead a couple of years toward a potential for more specials, then it stands out again. PS-Opportunity lost is money that was never yours as opposed to profit in the hand.
Both China Airlines and Emirates have withdrawn from Sydney-Auckland recently. I did a rough calculation and that's a drop in capacity of over 5000 seats each week :eek2:
From listening into the presentation :-
Over 280 internal parts now 3D printed at a quarter the cost of OEM parts
Reduced inventory, reduced obsolescent inventory, speeds up delivery, average 3D part print time 8 minutes.
CASK improvement forecast a bit flat in FY 18 due to delay in A321 neo
CASK improvement regaining down track in FY19
Fleet simplification driving CASK savings very well
777-200 refurbishment complete
777-300's getting a refresh now
Customer lounge upgrades very well received, half way through now
Dreamliner efficiency 20-25% better than 767's on a ASK basis
787-9 Code 1 - 9 Dreamliners configuration ideally suited to Asian / Tasman markets
787-9 Code 2 4 Dreamliners remaining on order will be spec as 54% more premium seats to U.S.
A321 Neo coming - 27% more seats at only a fraction more to operate than standard A320. To be deployed on larger leisure markets, leverage utilization as much as possible
Rob Mcdonald - CFO
Profitable growth is the focus
Only now understand critical international financial strengths that are durable and playing to that
Gearing is a guideline only 45-55%, comfortable with being at top of range at moment as capex program comes to a conclusion
Emergence of strong free cash flow looking ahead
Cost of debt continues to reduce, lower margins for new debt coming on board, no covenants on debt, debt is attractive to investors due to strong credit rating
Delay in A321 due to engine issues, delay was pushed out further at AIR's request to take advantage of new configuration with more seats, leases on some current aircraft easy to cope with delay's to neo A320 and neo A321
New seats on hand now, (seats often a reason for aircraft delay'(s)
$170m capex lower in FY18 due to aircraft delay's, (a good thing according to Rob Mcdonald.
Hedging gives us time to adjust our business model.
Looking at fleet replacement program for 777-200 starting from FY22...looking at request for information from manufacturers later this year.
Hedging gives us time to adjust our business model
Excellent liquidity still at top of range despite big special last year, may buy some aircraft outright to being this down to normal level's. (no talk of special divvies to hand out liquidity to shareholders).
Goal of maximizing ROIC over 15%
Consistency of dividend across the cycle their #1 aspiration - medium term focus
Truck loads of imputation credits on hand
Chris Luxon:-
We're constuctivly dissatisfied and there's a lot more to do in the business.
We have a very strong core domestic business
We have a very strong loyalty proposition
Pacific rim focus of network.
Well positioned, all markets profitable
De-risked our business by partnering with other outstanding airlines
Relentless daily focus about cost reduction
Very strong investment grade balance sheet.
Competitors now behaving more rationally.
Improving revenue environment.
We are done with acquisitions !! ( My read, special divvies are a given FY20-FY22 all things being equal if the market remains normal)
Low staff churn. Pilot poaching is not a big issue for AIR. We're proud of our pilots, they have a clear flight path ahead for progression within AIR.
5 year focus in thinking regarding profitable growth.
I'm speaking from a dividend yield perspective, removing specials. In answer to your question though, I'd say ATM would fit the bill. Regardless of all that, I simply wouldn't have held from $2.29 to $2.985, so it isn't really relevant to myself. I sold my holding early in order to even out income years somewhat, as the Air divvy was paid in March and I didn't want any more divvies in that financial year.
Amazing how things can change so quickly.
Still I agree with Couta. The SP was around $3 when AIR was at record profits. How much further can it go? Probably another 10% but there's a bit of risk at the current SP too.
brought in about yr ago at 2.30 got the special divs + div , brought at 1.75 lots + more divs just sold the remainer of my shares reckon gains + divs = just over 100% gain in a yr so I thinks its difenetly one if not the best performing stock on the nzx wether it continues who knows but im departing the flight thx air nz for the great ride.
A superb presentation, clearly articulating their strategy going forward. Very impressively managed company.
Yep, a lot of toppy stocks on the NZX currently, however there is still SUM value to be found out there, for those happy to pay top dollar, that's their choice ,but I've been stung many times and had to sell for significant losses in the past, either that or wait years for the price to come back to your buy in average or not.
Emirates are withdrawing A380's from the AKL --> SYD run. They are being replaced by Queer and Nasty Airlines A330's instead.
http://australianaviation.com.au/201...s-drops-route/
Cabinet ministers travelling to Europe on vital government business will not be pleased.
Is the Blitzkrieg launched by sand state airlines faltering? Is the Tasman Emirates Stalingrad?
Boop boop de do
Marilyn
IMO there's far too much capacity on TT routes. Some reduction is both warranted and inevitable.
The lunch talk/questions off the record, will probably determine the close price.
Looks like the finger of death pattern has developed...
QAN up 6 cents to over $5 today (and that's without upgraded profit guidance), and has also been extremely strong in recent months. Gives a useful insight into how investors on the other side of the Tasman also believe the competitive environment is now more benign.
That sharp price spike on my/your screen, 285 close 295 launch today , typically followed by a negative period that may or may not recover. But then again if it is overseas investors driving the trend then "the sky may be the limit"... no pun intended. perhaps they think it should be more like our auuwwwssttraleeen bros
They just had a profit upgrade mate and the airline index is up overnight on cheaper oil prices. Today's share price improvement is quite a logical and perfectly understandable movement in my opinion. Tomorrow and the next day we'll see analysts come out with revised estimates for FY17 and FY18. I'm sorry but I think your logic of a SP fall tomorrow is predicated on nothing more than pure speculation.
arc, I would call that a shooting star, but for that to be a valid formation, it needs to close today just below the opening price. Doesn't seem likely at the moment. (probably already seen the back-fill)
As roger says, this mornings rise is based on the earnings upgrade
Cracked the 300
I will make this comment and this is not a ramp, it bothers me not one way or the other whether people think that, only 4% of holdings is retail so nothing to be gained by ramping IMO.
I remain of the view that nobody can reliably tell you which point of the airline cycle we're currently at.
What the company has done this year is show their business model in the face of arguably one of the fiercest periods of competition is extremely robust.
Their brand is strong, their management team are focused and their business model is underpinned by compelling tourism growth, a strong drive for cost reduction and a modern very fuel efficient fleet.
Looking forward, all things being equal I see competitor pressure further easing as we head into 1H Fy18 as we lap the year when new entrants launched with red hot opening specials and new entrants last year look to ensure their new routes are profitable or reduce capacity or extricate themselves from the route.
My preliminary thinking is I see nothing in today's announcement, (with further growth in depth on routes established last year for which the expensive development launch costs have already been expended) and further growth leveraging off the existing fixed cost base leading to further CASK efficiencies) which would make me think that ~ $550 before tax or $400m after tax isn't achievable all things being equal in Fy18 and FY19 with possible upside from there. $400m after tax gives 35.6 cps, this year I think we're slightly higher than that.
The average PE across the cycle is 11. John Key coming on board will add further depth to an already highly talented intellectual pool and very useful international contacts.
People who think $3 is the ceiling could be in for a big surprise in the years ahead.
Finished at day's high point 3.02, well done :t_up:
No surprises here
Wonder if $3.00 will now become strong support seeing it has broken through a mark that showed strong resistance
If as Roger says the big boys will mull over their models over night ....and start buying in earnest tomorrow and next week I reckon
Nothing to upset the apple cart until the full year announcement time - when is that
Kudos to you for calling it as being worth over $3, (I was too gun shy after last year's downdraft) but was topping up as recently as last Friday at $2.85 which speaks for itself. Couldn't believe the market didn't react late last week in a more positive way to the excellent April operating stat's, (my read is investors left a free lunch on the table late last week after those robust stat's). Institutional holders and analysts got a free lunch after today's presentation but I reckon my free lunch was more rewarding :D
Market could gain even more altitude when they announce close to $600m in late August. $525m figure looks extremely conservative.
Do you think we are looking at a special dividend?
Apparently this is the highest level in 16 years? I'm sure that's incorrect https://www.nbr.co.nz/article/market...s-record-after
That $1.70 / $1.80 level seems so far away ...but it wasn't that long ago
I recall them being $3.26 about 12 months ago?
See post #11151
In further excerpts from today's investor briefing management confirmed they were half way through providing new cuistomer lounges and that feedback to date from customers had been extremely positive.
Melbourne lounge for example looks great. http://australianaviation.com.au/201...bourne-lounge/
Today could be a big day for the AIR share price
Air New Zealand from a flyers perspective might just be another airline and nothing special but it is operational efficient and makes heaps of money in its home market from having an almost monopolistic position .......but from a punters perspective it has heaps going for it at the moment and market and current market sentiment will take it to new highs
I disagree, I've been to the new one a couple of times, including a Friday afternoon/evening rush hour and it was very nice, heaps of room. If you want to see crowed try Wellington domestic any weekday evening.
The food area is an exact carbon copy of the Auckland one which is a little disconcerting, almost makes you forget where you are after a long day at work !
Top tip, the ottomans in the shower/toilets have wheels on the bottom, if you pull it out from under the sink too hard they can fly across the floor. I gave some poor bugger in the next room one heck of a fright (judging by his loud 4 letter expletive) when my one slammed into the wall with an almighty bang.
credit suiss issued a underperform on air today after the presentation
Interestingly just a short while back when QAN announced their 3rd quarter result and underlying forecast before tax of $1.35 - $1.4b = ~ 53 cps after tax AIR and QAN were trading on exactly the same PE ratio of ~ 8 as I observed based on AIR's forecast of $500m before tax.
A short time later we have seen QAN's SP rally strongly and now trading on a FY17 PE of 9.67 as at a few minutes ago when their SP had added another 8 cps to trade at $5.15.
Using an input of $575m for AIR less full corporate tax of 28% on 1123m shares gives 36.9 cps and based on a SP of $2.97 still gives a forward PE of almost exactly 8, 8.04 (to be exact).
After yesterday's very positive presentation I am wondering which PE is more appropriate and I'm leaning towards the QAN one seeming quite reasonable.
Applying that 9.67 PE, (remember the 10 year average is ~ 11), to my assumption of profit before tax of $575m giving 36.9 cps gives $3.57.
Just an interesting observation, not suggesting its worth that or it will go to that figure anytime soon. Disc: Happily holding long term for exceptional dividend yield including specials over the next five years.