More bad publicity for AIR https://www.nzherald.co.nz/business/...ectid=12110581
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More bad publicity for AIR https://www.nzherald.co.nz/business/...ectid=12110581
Annual result much as expected
Next year going to make less -
Based upon current market conditions and assuming an average jet fuel price of US$85 per barrel, 2019 underlying earnings before taxation is expected to be in the range of $425 million to $525 million.
This excludes an estimated $30 million to $40 million impact from schedule changes prompted by the global Rolls-Royce engine issues.
With such a wide range makes you wonder why they bother put out a forecast ..all I know $385m is a long way from $540m and even $485m is not that good compared to $540m (10% down)
Never mind ...still making heaps and got heaps of cash to throw aroundbon new toys and staff bonuses and shareholders
good result , agree big downgrade in earnings next year
http://nzx-prod-s7fsd7f98s.s3-websit...646/285099.pdf
Based on mid point of forecast including engine issue costs, (finally they are coming clean and saying this is a real issue that's costing them serious money) pre tax profit is estimated at $440m compared to $540m this year. $440m compares to average analyst forecast as of yesterday for FY19 of $494m $54m less than previous estimate.
Mostly this is lower due to the impact of the RR issue, (an impact which the company appears to saying is non recoverable from RR?).
Final divvy as expected. Noting the forecast is based on a jet fuel price of $U.S.85.
I am hoping the RR issue will finally be resolved properly during the year ahead so the $30-40m cost is really an extraordinary item and normalized pre tax profit forecast at the mid point is $475m, more or less in line with analyst expectations of $494.
Shares about fair value in my opinion cum an 11 cent fully imputed divvy which is already priced in, in my opinion. Hold.
Further thoughts. Analysts are generally positive on FY20 and indications are that the current dividend rate is sustainable.
The market is hungry for yield with ANZ Bank this week coming out and predicting the next move in interest rates is down !
Market will be disappointed with FY19 outlook which at mid point forecast treating the RR costs as a one-off is 4% below average analyst expectations.
Logic would suggest this might lead to a 4% correction in the SP from $3.41 yesterday to $3.27 today...but these things often overshoot so maybe we'll see $3.20 soon still trading cum an 11 cent divvy.
There is still the possibility of special'(s) in FY20 - FY 22 but forgetting about those what does the investment case on a yield basis look like going forward ?
At $3.20 cum divvy, (theoretical ex price of $3.09), investors are expecting gross divvies of 22 / 0.72 = 30.55 cps going forward which gives a gross yield of 9.9% plus the possibility of specials in due course. I think there's a sound investment case at that level and I would be prepared to add around there. Happy to hold a modest stake in the meantime.
Forward PE for FY19 looks to be about 11. Shares priced about right at present in my opinion.
https://www.nzherald.co.nz/business/...ectid=12111737
Boomer of a result from across the ditch for Qantas.
Cool, thanks for the info Beagle. The dividend returns are incredible with this company. I get these Motley Fool emails talking about dividend plays on the ftse yielding 5%!, and here we are with yields almost twice that. My net dividend is 8.3% now. I think 8.7% GROSS was the absolute highest big bank term deposit you could get in the 2000s. I remember thinking when the GFC hit "gee I wish I had got one of them 5 year term high term deposits when they available". No regrets now.
I'd like to celebrate by buying a model aircraft. I wonder if they'll be bring out a model A320neo? I'll stay away from the 787-9, almost got that one before the troubles.
https://merchandise.airnewzealand.co.nz/aircraft
CASK improved
I reckon our man Chris must be getting bored now and not as enthusiastic as he was a few years ago. Been at AIR too long and maybe looking around for a new challenge / job. That retention amount probably keeping him but staying on for a few million isn’t always the most motivating.
What you think beagle
I second Beagle's analysis.
Just a few points to make in airline stocks. A lot of the time, airlines can do things right and operate efficiently like AIR has done delivering better CASK numbers and still see adverse results because of factors outside their control. The fuel costs were $135m higher which is almost the same cost of paying an 11c dividend as per their FS ($130m).
Looking at the outlook, I'm not sure if an 11c dividend would be maintainable if jet fuel prices climbed again to higher levels especially at the lower end of that $425-525m range. The dividend itself at 11c twice a year is $260m and then you have to factor in further investment which is bound to happen. Then you have to factor in potential raise in interest rates in the next 1-2 years.
I still think that the yield justifies holding the stock in the short term. However, if you are going to be in this one for longer than that just be prepared to have some ups and downs, especially investing in this industry.
Happy with that result, forecast is just playing it safe IMO, great resilient business so buying today. PS-Happy to chase it down if anyone's keen to offer any up under $3.30.
Sorry I didn't get time to listen in on the call today mate. Been looking after myself a bit today. Getting out and enjoying the odd bit of sunshine and eating well. Read an interesting long article on depression in a mens magazine. Will try and get time tomorrow to have a listen to the replay...must be a link somewhere and post some further thoughts including whether Chris seems enthusiastic. Its been a pretty tough year with one thing and another...good resilience but that RR issue looks sticky and that sort of thing must be grinding his gears a bit.
Might start a new thread on coping with the winter blues in the off market section soon...see what idea's others have.
That's easy if you can take the time off work and have a place that you can call home: Fly AIR to Europe from about mid July to mid August and lose 1 month of the worst of winter and get a month of the best of summer. Trying to do that every year from now on, have done the last 3 years and can recommend. If you book early enough can get a return ticket for about $2,000 incl taxes and we normally get a few days in either Shanghai, Hong Kong, Singapore to break the trip and see some other part of the world at the same time :)
Work pressure much too intense at this time of year. Happy for you though.
Price down 4% today much as I expected as stated in post #13712.
Looking forward to the analyst downgrades and recommendation to clients coming through tomorrow to reduce. They will take this as good research without realizing the SP has already adjusted and hopefully smack this down below fair value, maybe to $3.20 or hopefully even less. This hound is poised to pounce :D
Fuel this year was $927M
Current estimate for next year is $423M more or 45% higher at $1,350M
[compare QAN: $3B23 to $3B92 21% higher ??]
With a 'normalised' mid-point forecast of $475 NPBT down only $65M on this FY18 then they are doing pretty well.
Assuming that US$85 per barrel and NZ$/US$ of 0.66 into FY2020 that would raise the fuel bill again.
Also I have heard sensible talk of future expanded margins on Jet over Crude due to the increased demands of aircraft, and the low sulphur regs for shipping in 2020, though of course some disagree.
But the price of a barrel rarely stays still for long, so who knows?
On another note I am confused as to just how many A32XNEOs AIR have on order, I hear 24 from reliable sources but I can not match that to the AIR docs.
Dreamliner to Shanghai turned back to AKL this morning
Not good is it, for the PR, people's feeling of safety, and also the huge cost that AIR faces having to re book all those passengers that were going on to other destinations. How long is this issue going to go on for? My partner is flying Vancouver to Auckland shortly but not on an AIR plane but one they have hired for the time being. Hope the service is up to usual standards. Hope AIR have some good insurance to get back all their lost income and also lost reputation and loyalty...
Chris admits it has been a tough year, or SUBOPTIMAL, with the Dreamliners :-) https://www.nzherald.co.nz/business-...lery_id=197366
I was on a flight from Auckland to Nelson a couple of weeks ago. We sat onboard for nearly 2 hours because of overloading of luggage, while they moved the luggage backwards and forwards. In the end they cancelled the flight because they couldn' t sort it out and the full plane load of people was told to go back inside and book another flight. Pilots and crew were appalling.
Yes it is and you can imagine the anger from passengers, including yours truly. I'd just flown in from London (with AIR) and ended up flying via Wellington to Nelson extending my trip by 8 hours beyond schedule. Have never had service like that from any airline. Appalling.
That's it, keep up the negative talk folks, lets get this down to $3.00 and then pounce ! Might wait another day or two for the analyst recommendations to work their magic.
Read the behind the paywall NBR article on this and have also read the FAA release when they reduced the ETOPS rating on RR powered Dreamliners.
What is now (sadly) clear is this ETOPS reduction is costing AIR $30-40m per annum as flights to North and South America cannot be undertaken with these aircraft and some flights to Asia are also affected. Asia flights may involve a suboptimal route to stay within range of a diversionary airport to meet new ETOPS requirements.
Thoughts.
1. It is now clear that AIR are not getting any compensation from RR for the flight restriction impact of this amended rating. I think this is extremely disappointing.
2. What's clear from the behind the paywall article on NBR is that RR are really, really struggling with this issue. Originally the engines were all to be inspected by April 2018. RR have over 300 of these engines in service and are now talking 12 months before engines come back...wasn't especially clear in the NBR article but what is clear is this issue is "sticky".
3. The analyst on NBR thought as this $30-40m was a one off its ok to treat it as an extraordinary item and ignore it going forward, (and to be honest that was my thinking yesterday too)
4. Reflecting on this overnight and recalling the text of the FAA ETOPS rating change I recall distinctly that renewal of 340 min ETOPS is by no means a certainty and it is very clear this will take quite some time.
In my opinion there is a chance that the better rating may never be achieved again which would render the dreamliners as sub optimal for AIR's requirements going forward.
More likely it will take several years for RR to prove the newly designed replacement components are reliable. We have discussed on here before how sometimes problematic engines can go on to be exactly that despite changes in components. I think there is a real chance of that.
Best case in my opinion is that extended twin operating rating is restored in about 3 years. Impact in the meantime is about $30-40m per annum, about 3 cps in annual earnings. Obviously if the rating is never restored the impact on earnings is very sticky.
I think there's about a 50/50 chance the rating doesn't get restored. I have lowered my valuation of AIR by 15 cps. I see fair value at $3.20 cum dividend, $3.09 ex divvy. I am okay to modestly increase my stake at $3.20 cum dividend but that's a yield story at that price and its no bargain in my view, just fair value there.
I also think snow leopard made a good point recently on fuel.
ETOPS = engines turn or passengers swim :)
Beagle ...didn’t I say once a lemon always a lemon or something like that,
Yes you did mate. I've enhanced my understanding of this engine somewhat since then and without in any way pretending to be a jet engine engineer my understanding is that from a design point of view they really pushed the operational parameters of the engine to get the extra fuel efficiency. When you really squeeze something hard maybe reliability and longevity suffer and maybe that's a systemic problem going forward ?
Has it been stated that the Shanghai turn back is engine related or is that just sharetrader speculation?
https://en.wikipedia.org/wiki/Boeing_787_Dreamliner Plane was designed so that interchangeability is possible in 24 hours. Even if AIR bit the bullet on a full changeover, (which is incredibly unlikely in my opinion) the issue is GE are not going to have 20 or so GEnx engines sitting in a warehouse for immediate delivery even at something like $US20m each.
AIR are caught between a rock and a hard place with these engines and RR are struggling. Just got to hope that RR's newly designed components fix the problems and prove to be durable. I see AIR shares touched my buy price of $3.20 earlier today. I was out and didn't have a limit buy order in at that price and to be honest for whatever reason I do not feel disappointed to have missed that opportunity. My gut feel is there could be a slightly better one in due course. Momentum is a powerful force. Maybe a bit more of a correction coming.
(Anecdotal)
We had a 3 hour wait in the plane (777-300) on the tarmac the other day before take off due to a bung pilots chair. BNE-AKL
There were over 300 people on the plane and their seats were all good but the captains chair had some failing in a component which we were advised was required by the regulations. It took an engineer 3 hours to fix. The extra gall was added by us being told when the fix job had been completed but they now needed to furnish photographs and gain approval from HO to fly. This took almost half an hour itself !! I think they must have used carrier pigeons.
We missed our connecting flight ( Air Chathams ) and despite not being obliged to assist AIR put us up for the night in a hotel.I was immensely grateful as was travelling with 86 year old Mum - but shareholders might not be so happy.
I hate airlines as a sector but even with that strangely I do want to nibble at AIR. Stop your barking Beagle. :p You are probably right about it having a place in a portfolio though.
Edit
Oh and Queensland has been very summery during my time there over the last few weeks. Weather app only needed the sunshine icon the whole time. No need to go to Europe for summer really , if you dont want to.
Guidance range for FY19 is wide, some punters don't like that, I remember last time they gave a wide range like that the price dropped then they upgraded along the way and nailed the top end.
Good support on close at $3.235, with a nice fat divvy locked into that price and a Sept 6th Ex date I'm expecting divvy seekers to turn up next week.
https://www.marketscreener.com/AIR-N...407/consensus/
As expected some pretty sizeable downgrades for FY19. Average broker 12 month ahead target price now just $3.15. In line with where I see it too. Worth a bit more trading cum an 11 cent divvy but ostensibly a yield story at this level.
On a theoretical ex divvy price of $3.125 and assuming they can pay 22 cps going forward (they could be stretched a bit to do this in FY19 with fairly sizeable capex and only 28 cps earnings but I still think it is likely the board will maintain it because capex eases off significantly in FY20 and then further again in FY21). Lots of references to sustainable dividends in their presentation this week so the board won't want egg on their face next year if they can help it will they !
(22 / 312.5) / 0.72 = 9.78% gross yield + possible special(s) early next decade. Pretty sound investment case from a yield perspective in my opinion although not without risk in terms of where the fuel price will go and how long the RR fiasco will continue to be a thorn in the companies side.
HOLD.
Not sure - price is set by trading, not by owning. Government might have impact on the stock price every time one of their populist ministers is making inappropriate noises, but otherwise: their ownership is quite irrelevant to the price finding. Same with instos - they only impact on the price if & when they are actively trading (but yes, they might).
You make that sound like some evil cartel of insto's sitting together each day and determining the price which they than force on the innocent and helpless market.
Anybody who is trading is helping to shape the market price. In AIR's case it is certainly not the government as owner (they don't trade), but sure there are some local and international insto's (with quite diverging interests - some holding, some shorting, some hedging, some long term investors) and than there are retail investors.
None of these groups "sets" the price - the price is set by a willing seller (no matter of which holder group) finding a willing buyer (again irrelevant from which holder group).
Craigs' target price $2.85.
NB.Do not think they have ever been right with this stock.!..lol.
Jacinda thinks Christopher is her "go to" man to sort out this problem with low business confidence. http://www.sharechat.co.nz/article/d...-this-termhtml
https://www.msn.com/en-nz/news/natio...cid=spartandhp
Chris full of confidence despite lower forecast profits this year so she's probably made the right call on this occasion.
Hey Winner...Chris will love this sort of thing...probably keep him going at AIR for at least another few years.
He'll really relish the opportunity to get on his soap box in front of other business leaders and tell them about relentless positivity, investing in green initiatives, lowering the carbon footprint, caring for the environment..."Let's do this" He'll really think he's making a difference and that'll be just the ticket to keep him motivated.
Seriously though...Jacinda getting alongside and working with Chris Luxon is probably the single smartest thing she has done since being elected in my opinion.
Hopefully he can talk some sense into her.
A smart move and like you say I’m sure hes going to enjoy the extra spotlight. Will be really interesting tomsee who else they get on that council.
Literally got the govt's ear, got to be worth a few cents extra on SP. Healthy profitable AIR pivotal to a healthy NZ inc
He's a good natural leader. I've chatted with him after a number of annual meetings and watched him talk to others. He has an easy way about him that puts people at ease and he communicates very well. I'm sure he'll relate with Jacinda well and this gives me a bit more confidence that Labour are taking this matter seriously.
Most retailers,motels,rental car companies,etc either run at a loss, or break even, from Mother's Day to Father's Day.
Paul Krugman once said what people learn from running a business won’t help them formulate economic policy. A country is not a big corporation. The habits of mind that make a great business leader are not, in general, those that make a great economic analyst; an executive who has made $1 billion is rarely the right person to turn to for advice about a $6 trillion economy. (Krugman)
Whether Jacinda’s new advisory group is just a mutual admiration society only time will tell.
But as long as the world believe that Jacinda’s doing something and the input of Luxon and his mates are going to help to guide economic policy for the good she has achieved her aim — essentially diverting attention away from the problem for while. Or maybe it was all just window dressing to get some more headlines.
Good post mate. One suspects that with about 100 working groups working on a vast range of policy any assurance Jacinda gave about her understanding of the need for certainty for business is at best window dressing lol.
Perception is a powerful thing though. She did look good on the telly last night getting up close with Chris. Maybe some of his good common sense might rub off on her.
Maybe just the perception that they are listening to business is all that's needed to boost confidence slightly and keep the problem swept under the carpet for now ?
Anyway..I blame the spent fumes from aircraft engines that sometimes fly over my house...I bought a few more AIR this morning at $3.30. Probably regret it but when you're a dividend hound at heart its hard to change one's nature and the gross yield looking forward makes a solid investment case. Maybe they have a bit of brand pricing power to recover the higher jet fuel prices this year ? Who knows, time will tell.
Seems a very glass half empty way of looking at things if you don't mind me saying. There's cracks appearing in society everywhere, from unaffordable housing, unsustainably low wage economy for teachers, nurses police etc, debt being loaded onto future generations, effects of climate change, dependence on fossil fuels, unsustainable welfare etc & we can't just keep kicking the can down the road, there needs to be some change/transitions to face these challenges, which some of us believe this govt is trying to do ( & probably Bill English would have started to tackle too)
Mai Chen wrote a very good article recently on diversity in the board room, being not just about getting more women or ethnicities around the table, but more importantly a range of well informed & articulated opinions, & not just having a diverse looking group of people, agreeing with everything the chairman says, which is unfortunately so often the case.
I can only see it as a positive that Jacinda Grant etc have established a business advisory group, who may not get everything they want but they are listening to their specific concerns & politics & policy as we know is all about compromise.
3.40 is the magic number. if it could break through that it could be very bullish.
Virgin(Under Arm Bowlers Division) has just posted an awful annual result. $A714 million statutory loss.
This will have caused a sharp intake of breath in Abu Dhabi, Hainan, Singapore and Necker Island.
Their plan to include bags and meals in basic fares across the Tasman could be a winner.
https://www.nzherald.co.nz/business/...ectid=12115599
Boop boop de do
Marilyn
PS. The Virgin spokesperson in the Herald video hints that Tiger Airlines may fly across the Tasman.
Actually it is quite a good result and maybe the forums resident accountant can explain to us why they would de-recognise $511M of tax assets, that they can re-recognise in the future.
But I came here to talk pilot shortages.
This has been the Jumbo in the hanger for a number of years now but airlines are actually starting to making mention of it in their reports, announcements, etc.
So you have been warned, even if you did not notice ;).
Time to fly:
http://hd.wallpaperswide.com/thumbs/..._flying-t2.jpg
Love Shane Jones .....and of course Jacinda and Chris are the beginnings of a mutual admiration society
Morning Report (@NZMorningReport)
30/08/18, 8:47 AM
.@GuyonEspiner asked Regional Economic Dev Minister Shane Jones about calling business advisory head a 'celebrity appointment'. He responded:
"Chris [Luxon]... would know one of the commandments is do not covet the arse of your neighbour. Goodbye." radionz.co.nz/national/progr…
Morning Report (@NZMorningReport)
30/08/18, 9:02 AM
@GuyonEspiner "I've got no time for celebrities in business... He is a celebrity. Chris Luxon regards himself without a sliver of doubt as a key feature..." - Some excerpts from the interview with Shane Jones. Follow the link above for full context.
Interview is here https://www.radionz.co.nz/national/p...elebrity-jones
.......but I doubt many if you will bother listen
Christopher hates being called Chris ...esp by Shane
Hi Winner, only heard the first part (on Australian banks) of the 'Greetings from'.. Shane Jones interview this morning while grabbing some breakfast, but just had to listen to the 2nd part of the interview on CL after seeing your post.
Think he likes stiring the pot up a bit & seeing what rises to the surface. He's a character all right, colourful earthy eccentric, contorted, & hilarious way to end an interview! Think even Guyon was amused.
Kiwi Beagle doesn't pretend to have any expertise when it comes to Australian taxation matters but will opine that normally the derecognition of tax assets, (losses carried forward) is because there is no longer the reasonable expectation that these assets will be able to be utilized in the future.
I haven't looked at Virgin's gearing for a while but I would imagine with that statutory write-off its even more shocking and badly stretched than it was last year. Talk is cheap regarding expansion. Finding aircraft, crew spares and the capital to invest in another offshore operation is not cheap.
Borghetti or however his name is spelt, the CEO of Virgin is acting like a lover spurned. He appears to be wanting to run a vendetta campaign against a vastly stronger AIR. He must be livid AIR is now code sharing with a quality airline.
Rock star Chris will sort Cindy out.
You spend too much time on AIR planes and not enough time reading AIR announcements.
Original media release:
Qantas and Air New Zealand announce codeshare deal to make travel easier
AIR must be struggling to fill seats to London. Early bird sale at $1,399 return which is pretty remarkable when you consider the taxes out of London and the current fuel price but what caught my eye in terms of an outrageous below cost bargain on a good quality carrier was Etihad to Dublin for $999 return.see www.flightcentre.co.nz
Apparently NZ2 LAX-LHR stopped off at Reykjavik last night
Was it for you Iceman
Flight diverted for sick passenger to be hospitalized
Heard somebody today say ‘jeez, Air NZ have more sales than Briscoes’
Most of their cheap flights are on partner airlines, not an AIR NZ plane. E.g. The cheapest flights to London are Air NZ to Shanghai, then change to another airline.. Air NZ all the way is $300 dearer each way.
The rich and famous should have known better .....next time they need to ask Raz
https://www.nzherald.co.nz/entertain...ectid=12123850
Not really surprising. Haven't seen any radical initiatives on the digital front and he's not to the best of my knowledge been mentioned much in recent investor presentations. Chris Luxon being pretty kind in his farewell endorsement, in my opinion. https://www.nzx.com/announcements/323962
"Air New Zealand is conducting a global search to identify a new Chief Digital Officer"
As long as they are not considering Derek Handley... :mellow:
Solid stat's for August. SP up a bit in response.