I see it managed to cap at 160cps! The ceiling finally kicked in, market trend prediction photo attached
Attachment 11349
Printable View
I see it managed to cap at 160cps! The ceiling finally kicked in, market trend prediction photo attached
Attachment 11349
Other thing about AvGas is that it rots - shelf-life of about 1yr or it's not going near an airliner. Practically I assume that means AirNZ needs to onsell futures contracts at a net loss or default on them? Neither sounds like a fun time. Not like they can fill a few jerry cans with the surplus and keep them in the garage.
My line trimmer doesn't like petrol thats more than six months old ... wont start but put some fresh stuff in it and vroom we are away first pull.
I understand Marcus Curly of UBS has estimated their operational cash burn at $211m per month. I haven't seen his detailed analysis so am not sure if their includes closing out their fully collared fuel position this quarter. If not, closing out that position could be around $40m per month this quarter in addition to his figure.
I won't get into a line by line because the two massive underdetermined cash burn figures on top of the above are :-
1. Redundancy costs. I think its fair to say as an absolute base case with redundancy costs there will be no reduction in their human resource cost this quarter and far more likely it will be considerably higher than normal. How much higher is very difficult to gauge.
2. What percentage of customers with prepaid tickets, (amounted to $1,380m as at 31 December 2019), are entitled too, and will demand a cash refund ?
Offsetting the above partially there will be a significant credit for the wage subsidy which if my memory is working this week was about $70m already received.
Its also important to note from a profit and loss perspective (although its a non cash item) depreciation of about $50m a month is on top of the above.
Conclusion:-
I remain comfortable that cash burn will be somewhere in the region of $300m per month for the April to June 2020 period all things considered. Regardless of where one estimates the monthly cash burn its extremely hard to see how they can survive through to the end of winter without calling on the Govt or shareholders for more money.
I estimate their cash position will run dangerously low at some point in June or early July 2020.
Share price on fire again this morning
What’s the point of second guessing cash flows etc .....it’s all about punter sentiment