Coronavirus: Air New Zealand cuts more flights
https://www.nzherald.co.nz/business/...ectid=12313941
demand obviously falling rapidly
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Coronavirus: Air New Zealand cuts more flights
https://www.nzherald.co.nz/business/...ectid=12313941
demand obviously falling rapidly
Yes well I have to admit I halved my holding at beginning of January even before Coronavirus struck due to challenges AIR facing with RR Dreamliner engines not even beginning to be solved for at least another 18 months.
Then have sold almost rest of holding recently as this does look really ugly.
Everyone I know postponing/cancelling holidays & with no travel insurance I cant imagine how anyone could take the risk.
One of our family members ended up in hospital in the US and the eventual bill was well over US $100,000 - fortunately covered by insurance.
Once an airline gest into strife it doesn't take much to tip it over the edge
Flybe broke (again)
https://www.theguardian.com/business...nounces-rescue
Gwyn Topham, the Guardian’s transport correspondent, predicts this morning that Flybe won’t be the last. Virgin has enacted emergency money-saving measures after bookings halved; Ryanair and easyJet have cancelled hundreds of flights to Italy and elsewhere; BA has even cut transatlantic flights; and Donald Trump has held crisis talks with US airline bosses
https://www.odt.co.nz/news/dunedin/d...versity-travel
Just more examples of a further step down in demand, when main NZ organisations reduce travel domestically expect things to financially deteriorate quickly for AIR
Amongst some of the airline news from Europe today, FlyBe gone into receivership and Lufthansa Group parks up 150 planes and cancels 7,100 flights in March, about 25% of its schedule. Their shares down 5.5% today and 22% since Feb 21
https://www.barrons.com/articles/sou...ks-51583422748
Airlines stocks getting hammered - ugly day for the sector.
US$100 billion expected in losses for airline sector.
Guess another earnings downgrade for Air NZ may be on the cards.
IATA just came out and just on quadrupled their estimate of the impact globally on airlines from their earlier estimate in February.
Many North American carriers down 12-13% overnight.
Some cruise lines down ~ 15% overnight.
I expect AIR will go under $2 in the very near future.
Several experts on CNBC saying the sector is basically un-investable at present, (Airlines, cruise ship operators, hotels and other tourism stocks).
Extremely serious implications for AIR, THL, SKC and Skyline enterprises in my opinion.
'This is a crisis.' Airlines face $113 billion hit from the coronavirus
https://us.cnn.com/2020/03/05/busine...vel/index.html
Thanks for the link. I can't help wondering what IATA's estimate of the financial impact will be a month from now ? My guess is it could very easily quadruple again.
AIR to downgrade outlook substantially in the next couple of weeks or just play it safe and withdraw guidance altogether and say we can no longer estimate the impact ?
Govt must desperately need this AIR dividend, which must be only thing holding up the SP, but can't imagine there'll be any future ones after this for some time.
Noticed a serious change in tone from Public Health officials in last day or two. Is it too late now for AIR to cut this dividend?
If there was a sudden announcement next week, SP would drop like a stone.
In my view excellent example for a dividend trap.
Holders might ask themselves what the share is worth without the in the current situation unsustainable dividend payment. If it is less than the current SP minus the dividend, it might be a good time to sell.
Of course - in 12 to 18 months things are likely to look rosier again (with many competitors gone and the virus coming under control). I do have as well no (well, little) doubt that AIR will survive, even it it is just due to government intervention. But really hard to say what the remaining value of the shares will be if significant dilution due to a bailout is a possibility.
The worst thing is - any dividend payments now are reducing their chances to get without capital raise through this crisis. I don't think it is in the best interest of the shareholders.
Anyway - not holding . DYOR.
I don't think the Govt desperately needs it, (their books are in pretty good shape at this stage), but the lack of caution by the board, and / or their lack of foresight is concerning. I think its highly likely the next financial transaction between shareholders and AIR after this dividend will be AIR asking for money i.e. capital riase.
I cannot recall any company declaring a dividend before and then annulling it before its paid. Such a move to the best of my knowledge would be not only unprecedented but a serious embarrassment for the board.
The potential for very serious demand destruction going forward should be obvious to all and airlines trade on very thin margins with a very high fixed cost base. Once they have worked their way through delivering on the ~ $1.4b of prepaid tickets that existed at 31 December 2019 (and let's for the sake of keeping this simple assume a similar figure that existed at the start of February before this started to look really worrisome), which amounts to about 3 months worth of flights, by May 2020 this could get very serious for AIR.
If it was safe to travel in aircraft with this virus why have AIR stood their entire crews down that were working on those flights that the corona virus passenger was on ?
They weren't within 1 metre of that passage for 15 minutes like the ministry of health tells us is their "official risk zone". Who's telling porkies ? Ministry of Health, AIR or are we in some sort of state of malaise where nobody really knows how to accurately assess the risk ?
How long before the public en-masse, decide its better to play it safe than be sorry ?
I was laughing and joking to a colleague a couple of nights ago and noticed I was emitting small droplets landing on his face-he didnt seem to notice but I moved away to about 2 metres which seemed a lot safer.On reflection if I had corvid-19 it would only have taken seconds to transmit the virus.Also my droplets were all over his face so he could easily inoculate himself later(also I probably put a few on his conjunctiva).
So yes they must be telling porkies as it saves having to test people.
https://www.nzherald.co.nz/business/...ectid=12314164
AIR takes axe to services with Hong Kong, Taipei and Singapore flights down 25-50% over the next few months. "Demand has fallen off a cliff"
Denial... denial... denial
Airlines heading towards worst year for long time ...and it’s only March
I think people have already decided en-masse to not choose to make new airline bookings unless its absolutely necessary for business purposes.
Younger travellers less at risk might still choose to make new discretionary leisure bookings if the price is right but the real wealth lies with the baby boomer generation who are most at risk so there's likely to be a lot of empty seats towards the front of the plane.
Was listening on CNBC this morning to the multi billionaire that owns the Houston Rockets and chains of hundreds of restaurants around the world as well as hotel and casino interests. He said he lost ~ $1m a day this week on his restaurants. He likened them to the airline industry with very high fixed overheads. "Once you lose just 20% of your customers for a sustained period of time you go broke".
AIR's average load factor has been about 83%. 20% off that is 66% and I would think with that load factor on a reduced level of services, their losses would be more than $1m a day. If that survey is indicative of forward intentions towards travel world-wide, there's very, very serious trouble ahead for all airlines.
Opps indeed. Another problem is the vast number of staff making $250K plus https://www.youtube.com/watch?v=3JxSLnvxP0w
No surprises here. We have always known that airlines was about the riskiest sector on all exchanges.
Air New Zealand Sells London Heathrow Airport Slot For $27 Million (Published on Mar 6 2020)
https://www.forbes.com/sites/willhor...o#73519e1c763d
I agree, though I would think your assumptions re capacity reduction still quite optimistic. You are modelling a roughly 25% reduction of flight traffic. Lufthansa just cut 50% of their flights!
https://www.theguardian.com/business...-travel-sector
Obviously - nobody knows yet how long the virus scare keeps going, but I'd think something like 6 months (our winter half year) with 50% capacity and after that some ramp up again might well be in the cards.
Better expect a red FY2021 as well ...
At any one time they have 2-3 months worth of flights pre-booked so these booked before this virus turned really scary will see them doing sort of okay in March and April, maybe scratching to break even for those two months. (I predict a lot of people won't turn up for their scheduled travel). Things get VERY ugly from May onwards in my opinion and I agree, this probably drags them down into a loss for 2H.
I think its highly likely they'll be looking for substantial new capital before the end of 2020. Realistically the only way to get this will be a deeply discounted rights issue with very clear implications for the current share price. I hope shareholders enjoy the dividend payable shortly, its probably their last one for the foreseeable future. This is uninvest-able at present, unless you are short :D
Meanwhile, across the Tasman https://www.smh.com.au/business/comp...y+7+March+2020 Its pretty ugly there too.
I’m picking that on Monday we will have a much clearer picture of where Air NZ is at.
Thanks mate. A case of once bitten twice shy. I was slow exiting last time this quickly lost altitude so have made a point of sitting very close to the emergency exit and having a parachute, ever since :)
One has to feel a bit sorry for Greg Foran. What a brutal introduction into the industry :eek2:
AIR have been in an earnings recession for years now ....so what’s new
AIR they say is cyclical, I posted a monthly chart recently to try to illustrate. Didn't get much feedback on it, perhaps because the up/down of pre-2012 had a predictability about it (20 month cycle), whereas after that the SP just chewed up three cycle period upwards ending at $3.61 (very close to the third cycle period end - spooky).
Since then the next 20-month cycle down period, has been followed by the current period, also down. So maybe there is a new super-cycle 5-years period. If so, I have technical supports at $1.82 (the .618 fib), $1.72 the recent low, $1.32 (horizontal support and .786 fib), below that is the 2012 low $0.72.
Who knows what all the factors are the make a sector cyclical (and company), TA doesn't help with the 'why' question, but one thing is for sure, this cycle is down, ending October 2020. If it really is now 5-year cycle (currently down), the sub $1 SP is in play.
Hard to believe I bought into AIR in 2012 with great expectations, sold a few years later for a very nice profit then rued not holding as it went to well over $3. Nowadays I couldn't stomach getting back into a gut churning flight on AIR unless it plumbed the depths and presented an opportunity too good to ignore.
Earnings are very cyclical as well baabaa - repost of chart from a few days ago
Profits declined for 5 years in a row 07 to 12 ….grew 4 years in a row to 16 ...and its been downhill ever since with 4 years of decline ...and probably more to come and possibly heading back to 2010 levels.
I reckon youd have to say that 2016 was so exceptional that it should be called an outlier and a number never to be repeated, Exclude that and EPS has average 20 cents over the last 14 years.
The only thing that has kept the share price up is the seductive power of a high yield.
Appreciate your chart, thanks. With you on this. It will have to be compelling value for me to get in again. Compelling value for me is not NTA of $1.52 (ex divvy). I would want a substantial discount to NTA and some TA sign that it had built a base to reenter. The chance of this going under $1 is very real in my opinion, perhaps 72 cents which is about half the ex divvy NTA is also a chance. A capital raise this year is a very high probability in my view and if this coincided with some signs of a vaccine for this virus being close to release that might present as an opportunity. To me this still presents as the standout short opportunity on the NZX so I'm keeping my position on.
https://www.stuff.co.nz/business/120...risis-playbook
common held view perhaps and why share price as not reacted more todate?
QAN down a very similar percentage amount since the risk was obvious in early 2020. (AIR down to 206 from 305 = 32.5%, QAN down to 466 from 720 = 35.3%) Possibly at this stage investors are somewhat hopeful the virus doesn't become a world-wide pandemic.
I am working on the assumption it does and a vaccine isn't available until sometime in 2021.
The scenario I envisage is that as the death rate starts to build up in N.Z. the majority of people will be too afraid to fly. No amount of reassurance about their cleaning regime or air filtering system will be enough. The fear of possible death will put people off flying and AIR will see demand destruction unlike anything they've seen before, (if they're not getting it already). Well respected aviation commentator Grant Bradley in the Herald the other day said new booking demand had already fallen off a cliff.
Under that scenario AIR will be burning cash at a phenomenal rate and will have no other alternative later this year but to approach the Govt for another bailout.
The key difference between this risk and 9/11, (which required a bailout despite assurances almost immediately beforehand that they had $1b in cash, deja-vu anyone ?) is that 9/11 had a short and very sharp impact on demand and in the months that followed as it became clear that planes weren't going to be flown into tall buildings on a regular basis and new much stronger doors were installed on aircraft to protect the pilots, this time no short term solution is readily apparent. Also the risk is everywhere this time and cannot be seen, not limited to a bunch of nut case extremists like last time.
In terms of the GFC, being profitable during a lengthy financial crisis where people are worried about their finances is one thing, trying to remain profitable during a lengthy world-wide pandemic where people are afraid of dying, is quite another thing on a completely different scale in my opinion.
Paying out the full 11 cps dividend amounts to gross recklessness on the boards part in my opinion. What logic can there possibly be in pretending everything is okay and paying out the same dividend as last year in the current circumstances ?
Sounds like even cheap good quality beef cuts in the freezer won't be any use -- we'll all be dead
Nontheless when AIR profits were last down at where the heading the share price was below $1 for a long time ...low was around 60 cents by the look of it …..so you will probably be getting your cheap AIRshares one day ….assuming the virus aint got you first
Yes, there's going to be some outstanding opportunities in cyclical shares and others for those that survive with their health and finances intact.
Many experts saying we already have a world-wide pandemic even if the WHO are not calling it that just yet. https://www.nzherald.co.nz/world/new...ectid=12314809
AIR was bailed out mainly because they had bought Ansett and had placed them in administration on 12/9/01 …. took the government a month or so to work out how much was needed to keep them flying
911 didn't help but if they hadn't gone the Ansett way they may have survived 911 OK
If I remember correctly Ansett outlay was about $450m ? The Govt bailout was close to double that,. despite assurances immediately beforehand they had $1b in cash, just like they did the other day.
Their dividend due to be paid this month is ~ $124m so they'll have only about $879m in cash this time, + profits since 1 January, less any capex on new aircraft since then.
By May 2020 things will start to get desperate for AIR, you mark my words.
Another "Cassandra" prediction? Better to remember not to invest in airlines!Quote:
By May 2020 things will start to get desperate for AIR, you mark my words.
;)
Not quite sure I can follow ... why would your ownership cause a plane to crash? As well - planes don't crash because they are owned by winner, but because they are made by Boeing :p:
Anyway - current problem is not who owns the planes, but airlines business model (high fixed cost and swiftly dropping patronage) ...
Probably be okay on the Auckland Islands too, as long as not too many Aucklanders actually go there lol. https://en.wikipedia.org/wiki/Auckland_Islands
https://www.nzherald.co.nz/business/...ectid=12314629
Bookings for March drying up according to Tourism New Zealand.
Guidance was really optimistic so not guessing anymore ....but dividend will still be paid
http://nzx-prod-s7fsd7f98s.s3-websit...581/318334.pdf
Don’t blame Greg for sort of blaming the media for creating these turbulent times ...“We have been continuously monitoring bookings and in recent days have seen a further decline which coincides with media coverage of the spread of Covid-19 to most countries on our network as well as here in New Zealand,” says Mr Foran.
totally expected if you dont know what the virus going to do how can any company predict earnings. be the last dividend paid for quite some time i imagine , dividend hunters are going to get severely burned
Yeah, I mentioned last week I expected they would withdraw guidance altogether. At some point very late this financial year you may see them come out and soften the market up for an overall loss in FY20, yes that's my updated view on this, they could lose more in 2H than they made in 1H).
Chief Executive Officer Greg Foran says that it is increasingly clear that Covid-19 has created an unprecedented situation and it is difficult to predict future demand patterns.
“
This obviously suggests this is worse than 9/11.
It is an interesting coincidence that after the Govt Bailout of the airline after 9/11 senior staff took a 15% pay cut. AIR also lost thousands of staff then.
All senior staff right across the airline earning more than $150K should do the right thing and accept a 15% pay cut until this thing is over. Extending a pay freeze when head office senior staff are so incredible generously paid is a weak response. At least Greg Foran did the right thing, good on him. Others should follow his example.
Absolutely ridiculous paying out the dividend in the current circumstances. Sends the wrong message to staff at AIR. Almost everyone, (except say workers earning less than $100K) should be taking a 15% haircut to their pay in the circumstances including shareholders.
Question. "How can you achieve a very, very large dividend % return"? Answer. "Buy a share that is normally returning a very good dividend, but buy it when it has become leprous due to temporary conditions that will return to normal in due course." Dividend hunters can see the long term gains outweigh the short term burn IMO.
the cold hard facts are if you are a air shareholder your going to lose a lot of your investment in the months ahead. until a virus cure is found or some other thing works
Last AR said there were 23,000 ‘investors’ with less than 5,000 shares
Would hurt a lot if they stopped divie
A fair proportion of AIRs Exec huge bonus payment is tied to the AIR shareholder returns relative to a global airline index.
So as long as the AIR shareholders don’t lose as much as shareholders of other airlines they might still get a bonus.
Had a chuckle when I read this yesterday. Disc: I used to be a client of Forsyth Barr but stopped listening to their advice over a decade ago.Quote:
Forsyth Barr - Air New Zealand gets an outperform rating. Its structural and balance sheet strengths leave it well placed to weather the storm.
''Our analysis shows that the capacity of Air (NZ's) cuts are deeper than its competitors and historically its responses to black swan events have been rapid and rational."
share price only down 1 cent? Mr Market is being unbelievably kind to AIR (for the first 3 minutes at least!)
Would have thought we'd already be looking at sub $1.80
Give it time. Analysts will drastically adjust their forecasts in the next day or two and the poor unfortunates that can't think for themselves and have to wait to be told will suffer accordingly.
Heck even Forsyth Barr who just upgraded air to Outperform might have to do a very embarrassing about face and downgrade them again.
AIR will lose money after accounting for extraordinary items and costs in 2020...you read it from me first.
Massive reductions in flights are coming. No point in flying with 40% load factors, might as well halve services.
Cheap fuel and their super efficient fleet will be helping the bottom line
if Parliament and Caucus goes into lockdown and MPs dont travel that'll be a big dent in AIRs passenger numbers
..........dont think I'd touch AIR even at $1.50 ATM ........... (cant believe it'd still HOVERING around 2buks TBH)
Ex dividend on Thursday, just wait.
I think this might have a wee rest around the $1.70-$1.80 mark for a couple of weeks after the dividend. After that as the sheer brutality of the way demand is falling off the face of a cliff becomes even more readily apparent it will resume its downward trajectory. Happy to stay short for the foreseeable future. There's a very real chance this ends in tears and another Govt bailout.
A fly in the ointment for short sellers will be when competitors announce they are withdrawing NZ longhaul services and AIR picks up those customers and then returns to a monopoly on those routes. I believe that will dampen the blow somewhat, although a blow it will still be to the SP.
QAN down 6.4% already as I type, AIR after guidance withdrawal down just 2.4%...ask yourself which is the more rational response.
hong kong airlines is asking air china to bail it out today otherwise bust
QAN now down ~ 10%, Australian market crashing, down 5.3% and its only been open for less than an hour :eek2:
Oil down some 30% may help AIR a little?? All depends on AIR's hedging I guess. (not that I hold AIR - just watching with interest.)
I wasn't referring to airlines or any specific airline mate...but I know you are superstitious about these things so will try and be sensitive to your idiosyncrasies :p (thank goodness for spell checker with that last word)
Interesting article behind the paywall on N.Z. Herald just released by well respected aviation sector journalist Grant Bradley
https://www.nzherald.co.nz/business/...ectid=12314920
Copyright limits me to one or two sentences as I understand it from what Vince has mentioned before.
Best sentence is this which gives a very interesting insight into the degree of demand collapse. "Last week one carrier was reporting 50 per cent no-shows; passengers not turning up. While those are tickets sold, it illustrates the fear of flying".
If a whopping 50% of people are not turning up when they have already paid for their tickets it begs the question how new sales are going :eek2:
So you're saying they're obliged to draw from the hedging contract, can't buy on market without breach, sorry I don't know exactly? If so, Mogul is correct they'll be shafted by the mark to market difference which is already quite a large percent price above market price - and going lower by the look of it.
Still, they will require a lot less fuel at the current rate of cancelled flights. Will they have a minimum 'take' on the hedge contracts as well, furthering the pain, or is it discretionary?
AIR's most recent fuel hedge position is here http://nzx-prod-s7fsd7f98s.s3-websit...043/317650.pdf
Put you guys a bit crook earlier. Actually 91% of estimated fuel use to 30 June 2020 is headged at between 53.68 and 65.16. With overall capacity cuts to date they have effectivly now hedged more than 100% of remaining oil consumption through to 30 June 2020.
In recent years AIR has primarily moved to hedging through the use of "Collars". As the term suggests what a collar does is try and collar the price within a specific range. If oil is outside that range, higher, AIR is in the money with its collar, if its lower, its out of the money i.e. cost. With the current spot price of Brent about $32 today they will be out of the money by at least $21.68 per barrel plus the cost of the collar.
They have also used some Brent call spreads and a small percentage, about 15% of consumption for the rest of this year, they have hedged the jet fuel crack spread...oil is one risk, the cost to crack it to jet fuel, another.
The bad news for the first half of FY21 is they have already hedged 70% of estimated oil consumption for Q1, (probably 90%+ with capacity reductions by then), at $53 and even 43% of FY21 Q2 has been hedged at similar levels.
For a look at how collars work here's a good article.
https://www.mercatusenergy.com/blog/...ee-Way-Collars
Bottom lining this for the time poor, AIR will not get any meaningful gain from lower oil prices until at least October 2020.
QAN down 10.9% today, AIR down 5.3%. Tomorrow could be a very interesting day for AIR shareholders.
Besides the 23,000 odd shareholders with less than 5,000 shares there,’s stuff all other shareholders anyway
Being so tightly held maybe one reason share price isn’t collapsing as much as some think it should be.
If you’re interested in current airline global capacity
https://www.oag.com/blog/coronavirus..._hsmi=84469601
Some European airlines are flying empty planes to keep slots, particularly into Heathrow. How mad is that ? The Transport Minister in the UK has written to the corporation running the airports and asked them to be reasonable !
Who's honestly buying this right now? You'd have to be mad